Page 6 - BE Theory Note

Calculating profit (or loss) at a given level of output

You can analyse a graph to find out if a profit or loss will be made at a certain level
of sales by comparing the total costs line with the sales revenue line.

Example – How much profit will the business make if it sells 500 units? Looking at the

Sales Revenue line, the value is £50,000. When looking at the Total Costs line the
value is £35,000

Profit = Sales Revenue –
Total Costs
£50,000 - £35,000
=£15,000 profit

Using a formula

If you know the contribution (selling price less variable cost per unit) you can use a

formula to calculate the profit or less at a certain level of output. For example,
looking at the data below, the contribution is £50, and the breakeven point is 200

units (£10,000/ £50)

Profit at 500 units =
Expected units – breakeven units x contribution
(500 – 200) x £50 =
£15,000 Profit

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