N4 Entrepreneurship & Business Management


Activity 2 1. Lindiwe wants to start selling “arty” scarfs at a Saturday craft market. She can buy a scarf for R85 each and she thinks she can sell it for R110. 1.1 Calculate the gross profit percentage for scarfs. 1.2 What would her mark-up percentage per scarf be? 1.3 What would her turnover, per month, be if she sells 15 per day?


2. The turnover of a street vendor selling bunches of flowers is R43 200 per month and the gross profit is R18 000. The monthly fixed costs amount to R7200. Each bunch of flowers sells for R60. Calculate: 2.1 The cost of sales of this flower vendor. 2.2 The gross profit percentage of this business. 2.3 The net profit percentage. 2.4 The cost of each bunch of flowers to the vendor. 2.5 The percentage mark-up?


2.9 Break-even point


The break-even point in a business is that point where the business is neither making a profit nor a loss. In other words, total costs (fixed and variable) are the same as total sales or income.


DEFINITION


The break-even point in a business is that point where the business is neither making a profit nor a loss.


The break-even point is very significant for your business. It tells you exactly what your first target in your business should be (i.e. to sell enough to at least cover your fixed costs). Once you have reached your break-even point, you know that the very next product you sell will include a little profit.


Think of your fixed costs as a hole in the ground. If, for example, your total fixed costs for the month amount to R2000, then the hole is R2000 ‘deep’. Every product you sell includes a variable cost part (what the product costs you) which must first be deducted from your product’s selling price and paid to your suppliers. What is left (the gross profit of each product) goes into this fixed cost ‘hole’. Once this hole has been filled up, you will start making a profit. Remember, this fixed cost hole needs to be filled up every month.


Example


Steely Sam manufactures steel tables. He knows that his fixed costs are R2000 per month. Furthermore, the cost associated with manufacturing one table is R30 (variable costs). He is currently selling the tables at R50 each. He would like to know how many tables he should manufacture to break even.


At the break-even point, his profits will be zero. Therefore the break-even point can be calculated by finding that point where sales equal total costs, i.e. variable costs plus fixed costs.


Question 1. How many tables does Steely Sam need to sell to start making a profit?


78


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82  |  Page 83  |  Page 84  |  Page 85  |  Page 86  |  Page 87  |  Page 88  |  Page 89  |  Page 90  |  Page 91  |  Page 92  |  Page 93  |  Page 94  |  Page 95  |  Page 96  |  Page 97  |  Page 98  |  Page 99  |  Page 100  |  Page 101  |  Page 102  |  Page 103  |  Page 104  |  Page 105  |  Page 106  |  Page 107  |  Page 108  |  Page 109  |  Page 110  |  Page 111  |  Page 112  |  Page 113  |  Page 114  |  Page 115  |  Page 116  |  Page 117  |  Page 118  |  Page 119  |  Page 120  |  Page 121  |  Page 122  |  Page 123  |  Page 124  |  Page 125  |  Page 126  |  Page 127  |  Page 128  |  Page 129  |  Page 130  |  Page 131  |  Page 132  |  Page 133  |  Page 134  |  Page 135  |  Page 136  |  Page 137  |  Page 138  |  Page 139  |  Page 140  |  Page 141  |  Page 142  |  Page 143  |  Page 144  |  Page 145  |  Page 146  |  Page 147  |  Page 148  |  Page 149  |  Page 150  |  Page 151  |  Page 152  |  Page 153  |  Page 154  |  Page 155  |  Page 156  |  Page 157  |  Page 158  |  Page 159  |  Page 160  |  Page 161  |  Page 162  |  Page 163  |  Page 164  |  Page 165  |  Page 166  |  Page 167  |  Page 168  |  Page 169  |  Page 170  |  Page 171  |  Page 172