Costs can be controlled TODAY!
Consider this question: "Your costs go up $1,000; how
much do you need to increase sales just to stay even?"
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cover costs --- so that no profit is generated, and no loss is incurred.
As a management tool, it becomes even more beneficial. Using it, you
can answer questions such as:
- What additional sales will I need to cover the rent increase my landlord is proposing?
- If I raise prices, how much can my sales drop before my profits are affected?
- If sales drop (in a recession, for example), how much do I need to cut fixed costs to
maintain my current level of profit?
- If I cut my price, what additional sales will I have to make in order to maintain my
current profit level?
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