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III. Assessing Product and Service Profitability
Оглавление– Calculating costs and expenses
Calculating costs and expenses is a crucial step in determining the profitability of products and services. It involves identifying all the costs associated with producing and selling a product or service, as well as any other expenses that may be incurred in the process. By accurately calculating costs and expenses, businesses can determine the price at which a product or service needs to be sold to achieve profitability.
To calculate costs and expenses, businesses need to consider both direct and indirect costs. Direct costs are those that are directly related to the production or delivery of a product or service, such as materials, labor, and shipping. Indirect costs are those that are not directly tied to a specific product or service, such as overhead expenses like rent, utilities, and marketing.
Once all costs and expenses have been identified, businesses can calculate the total cost of production or delivery for each product or service. This can be used to determine the break-even point for each product or service, which is the point at which the revenue generated from sales equals the total cost of production or delivery. Beyond the break-even point, each sale generates a profit.
