Breakeven
point and Marketing Budget
��� Doe has a
$70,000 one time investment. His annual �fixed cost� is 50% of sales.�
�Fixed� cost� in our case
consists of cost of
marketing.� His annual �variable cost�
is an estimate 25% of
revenues.� The �variable costs� include:
foundry, patina, cost of various
materials, plus labor cost for his workers.� Using the breakeven point formula (total
sales = fixed costs + variable
costs + investment) sales of $280,000
must be made in order to breakeven. (Variable 25% , or $ 70,000 of sales;� plus fixed�
50% or $ 140,000 for
marketing;� plus 25% or $70,000 which in
our case is a 100% return
on investment that would otherwise be net profit) This leaves us with a breakeven point. Note that
Doe�s overall cost after the initial
investment is all VARIABLE
taken that no cost occurs unless there is a sale. At that point 50% will be fixed cost for marketing, and
25% will vary depending on
the material used.