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🌏 | To the operating income level before the Corona disaster in FY23 = J. Front President


To the operating income level before the Corona disaster in FY23 = J. Front President

If you write the contents roughly
Reduce fixed costs such as sales promotion costs and improve the break-even point.

[Tokyo XNUMXth Reuters] – J.President Tatsuya Yoshimoto of J. Front Retailing said at a press conference on the XNUMXth, XNUMX ... → Continue reading


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Break-even point

Break-even point(Son-eki,British: break-even point, BEP) isManagement accountingOne of the above concepts.

amount of salescostThe amount of sales or the sales volume at which the amount of is exactly equal. The formerBreak-even point salesThe latterBreak-even sales volumeSay. If we just call it a break-even point, it means the former in management accounting,Management engineeringThen often refers to the latter.

If sales remain below the break-even point, losses will occur, and above that,ProfitOccurs. From thisProfitabilityAlso called.


To find the break-even sales, use the following formula:

Break-even point sales = Fixed cost / {1-(Variable cost / Sales)}

The ratio of the break-even point sales to the actual sales is called the “break-even ratio”, and the profitability of a company is sometimes evaluated by this.

Break-even point ratio = Break-even point sales / Sales

Using the break-even pointBusiness analysisWhat you do is called “break-even analysis”. Break-even analysis is a long-standing management analysis method that is intuitive and easy to understand, so it is still used today.

The smaller the break-even point ratio is, the higher the profitability is, and the stronger the ability to withstand the decrease in sales is. Therefore, the management is judged to be stable. About 8% is said to be good, but in reality, there are many industries that are slightly over 9% (depending on the type of industry).

Break-even formula

Break-even point sales

Break-even point sales formula

Break-even point sales = Fixed cost / {1-(Variable cost / Sales)}

Is derived as follows.

First, profit is sales minus variable costs and fixed costs.

Profit = Sales-Variable costs-Fixed costs (Equation 1)

Here, the "variable cost rate" is defined by the following formula:

Variable cost rate = Variable cost / Sales ... (Equation 2)

Variable costs can then be represented by the variable cost rate and sales.

Variable cost = Sales x Variable cost rate

Substituting this into (Equation 1) gives the following equation.

Profit = Sales-Sales x Variable cost rate-Fixed costs
=Sales (1-variable cost rate)-Fixed cost

Since the break-even point sales are the sales at which the profit becomes 0, if the profit in the above formula is set to 0 and the sales are rewritten as the break-even sales,

0 = break-even point sales (1-variable cost rate)-fixed cost

Becomes Therefore, the break-even point sales are

Break-even point Sales = Fixed cost ÷ (1-Floating cost rate) (Equation 3)

It is represented by.

Since the variable cost rate was variable cost/sales (Equation 2),

Break-even point Sales = Fixed cost / {1-(Variable cost / Sales)}

To get

Break-even sales volume

The break-even sales volume is obtained by dividing both sides of the break-even sales (Equation 3) by the unit price (sales per unit).

Break-even sales volume= Fixed cost / {Unit price (1-Floating cost rate)}
= Fixed cost / (Unit price-Unit price x Variable cost rate)
=Fixed cost ÷ (Unit price-Variable cost per unit)

Another derivation

The break-even sales volume formula is simpleLinear inequalityCan be derived from Sales quantity,S And

Income: Unit price ×S
Expenditure: fixed cost + variable cost per unit ×S

In order for income to exceed expenditure (profit becomes non-negative),

Unit price ×S ≧ Fixed cost + Variable cost per unit ×S

If This inequality S Solving for

(Unit price-variable cost per unit) ×S ≧ fixed cost
S ≧Fixed cost ÷ (Unit price – Variable cost per unit)

The smallest that satisfies this S Is the break-even point sales volume.

Break-even sales volume=Fixed cost ÷ (Unit price-Variable cost per unit)

Also, multiplying both sides of this formula by the unit price yields the formula for the break-even point sales (Formula 3).

Variable and fixed costs

We think that costs can be divided into “fixed costs” and “variable costs”.

"Variable costs" increase (almost) in proportion to sales, but "fixed costs" are charged regardless of sales (even if sales are zero, fixed costs are incurred). Profit can be recorded for the first time by collecting fixed costs from sales.

Variable costs include, for example, raw material costs, purchase costs, outsourcing costs, and the like. These have the property of changing with the increase or decrease in sales. The variable cost rate is defined by the following formula.

Variable cost rate = Variable cost / Sales ... (Equation 2)

On the other hand, the representative fixed costs are personnel costs (however, commissions are regarded as variable costs). Other equipment-related costs for running a business, such asDepreciationExpense,leaseMany expenses such as rent, real estate rent, and interest expense are included.

The sales minus the variable costs required for thatMarginal profitCalled. If this is larger than the fixed cost, profit is generated, so it is regarded as a surplus, and if smaller, it is regarded as a deficit. This is an index for evaluating whether fixed costs can be recovered as a criterion when it is difficult to secure operating profit in business operation.

To lower the break-even point

There are several measures to lower the break-even point and increase the resilience of the recession.

One is to increase the marginal profit ratio, in other words, to reduce variable costs (variable cost rate). Specifically, this includes reduction of material costs and distribution costs.

The other is to reduce fixed costs. Specifically, we will reduce the number of full-time employees,(I.e.Switching to more flexible employment, outsourcing,ア ウ ト ソ ー シ ン グIs equivalent to this. Another example is the removal of equipment that has become idle and has an extremely low operating rate. Although there is a temporary loss on retirement, it has the effect of lowering the break-even point in the medium to long term. In this way, restructuring of the business structure is essential for reducing fixed costs.

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