2016-12-28 00:00:00Profit & LossEnglishLearn the steps involved to determine your business' minimum monthly profit, and review a sample calculation.https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/10/small-business-owner-calculates-minimum-monthly-profit.jpghttps://quickbooks.intuit.com/ca/resources/profit-loss/determine-your-minimum-monthly-profit/Determine Your Minimum Monthly Profit

Determine Your Minimum Monthly Profit

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Minimum monthly profit is another term for a business’ break-even point. This number shows the minimum number, in dollars, that must be made to keep the business operating each month. Assuming a company sells one product, the steps involved in finding the minimum monthly profit are:

  1. Calculate the contribution margin, which is revenue per unit less variable expenses per unit, divided by revenue per unit.
  2. Divide total monthly expenses by the contribution margin to get break-even sales.

Assume a company generates $24 per unit of product sold and has variable expenses of $9 per unit. The contribution margin is:

($24 – $9) / $24 = 62.5%

Next, assume the company has $2,400 in fixed expenses per month and wants an MMP of $1,200. This totals $3,600. Thus, the break-even point in sales is:

$3,600 / 62.5% = $5,760 per month.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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