Business Analysis with Microsoft® Excel, Second Edition

Summary

This chapter has discussed several important tools that can help you understand how your company's profit picture is structured:

• The contribution margin analysis gives you a snapshot of how a particular product is performing, in terms of both its variable costs (which increase with each additional unit produced) and its contribution margin (sales revenue less variable costs).

• The unit contribution analysis puts you in a position to consider the profitability of a given product in greater detail.

• The break-even point in sales tells you how much revenue you must generate to cover both your products' variable costs as well as your fixed costs. This may imply that you need to lower your costs, increase your sales price, or increase the number ...