Break Even Analysis allows you to evaluate if your business is making a profit or not, so is integral in not only running a business, but also in directing the future of the business.
Break-Even Analysis Case Study: The Achar Company
The Achar Company is a small company started in 2020. They produce and distribute 10 kg buckets of achar. The Achar Company makes delicious affordable achar from the scratch using fresh and quality ingredient and delivering at a small fee according to orders across Gauteng.
The Selling Price per unit is R350 per 10 kg bucket of achar and the variable costs per bucket are R100, and that makes the gross profit to be R250 per bucket, but the fixed costs are R15250 per month.
In conclusion, we can see that this business is making enough profit only to cover the monthly fixed costs therefore the business is not making profit nor making a loss.
As the business owner, they can also identify other ideas in order to make profit. Such as:
- Increase the selling price per unit.
- Increase production units per month (make more Buckets of achar per months).
- Add another achar making machine,
- Rent a cheaper place
- Restructure or retrenchment
- Reduce salaries
- Review cheaper insurances etc.