Marginal costs in the economy are those generated by the production of an additional product unit, while in accounting they correspond to the average variable costs. By distinguishing between variable and fixed marginal costs, we can easily calculate whether to accept a special order or to discard the product. Let’s see it on the case of profitability of production under the private label.
Break-Even point is a method for calculating the profitability of a business. Income is calculated as the product quantity and the cost, and the costs are the sum of fixed costs and the product of the variable costs per unit with the amount. Therefore, breaking point is calculated by division of fixed costs and the difference of price and variable costs per unit of production. In following „recipe“ you will see the practical application of this method.