Author: Rafael Muñiz
27 pages
10 eur + IVA
to buy
16. Deadlock or threshold of yield
In a great number of small and medians companies the price begins to pay attention calculating the number of units that there are to sell so that with the obtained total income the carried out expenses can be covered, this is what “deadlock” is denominated or “yield threshold”, that is to say, the volume of sales that is realized through what the company obtains neither benefits nor losses.
The deadlock is, then, that one amount of income that generates a margin of contribution (percentage on sales) equal to the quantity of fixed costs. Over this amount income are obtained that, once absorbed the costs fixed, provide benefits and below the same they provide losses.
The calculation of the deadlock takes place starting off of the following mathematical formulation:
Benefit = total Income - total Costs |
Benefit = B
Total income = It
Unitary price = p
Sold units = q
Total costs = Ct
Total variable costs = CB
Total fixed costs = CF
Unitary variable cost = CVU
B = It - Ct = It - (CF + CB) = q x p - (CF + CVU x q) |
Remembering that in the deadlock the benefit is null, that is to say, the total income they are equal to the total costs.
It = Ct; q x p = CF + CVU x q q (p - CVU) = CF |
p - CVU = unitary Contribution of the benefit |
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GRAPH 3. GRAPHICAL REPRESENTATION OF THE DEADLOCK
16.1.
- It offers information on the risks derived from the variations in the volumes of production.
- It provides a clear vision of the effects of the increase of the fixed costs.
- It serves to determine the change in the benefits before the changes of prices and costs.
16.2.
- Production and sales usually are not simultaneous processes; the delay of the one against the other produces effects on the level of existence.
- The volume of sold products is not, normally, independent of the sale price.
- The variable costs arisen in the surroundings from the total capacity can vary more than proportionally the increase of production.
- To classify to the fixed costs in and variable depends on the horizon of contemplated time.
- If the range of considered production is extensive, the fixed costs can not remain constant and to increase.
- In diversified productions, the balance point can fluctuate by varied and diverse reasons (geographic areas, channels, types of clients).
- The extrapolation of the historical data, if these are not stable, can be dangerous, and the erroneous conclusions.
- In the traditional analysis the risk nor the uncertainty when realizing consider neither future estimations.
- This analysis is only valid for the short term.
