The algebraic expression of the cost-volume-result model that allows calculating the critical sales point (Q*) is given by:
Q*= (CF)/ ((P – CVM))
Taking into account the previously calculated values, we know that:
CF = €209304.41;
P (product price) = €1500
Pr (price that we will receive for the product, that is, without VAT) = 1500*0.77 = 1155€
CVM (average variable cost) = CV/Q = 5335698/5000 = 1067.1
Having said that, we were able to calculate the critical sales point, Q*:
Q* = (209304.41) / ((1155 - 1067.1)) =
Q* = 2381 units
After carrying out the necessary calculations, it was identified that the critical sales point, Q*, for our company is set at 2381 units. This number is of great importance, as it represents the minimum quantity of products that the company needs to sell to cover all costs, both fixed and variable. Strategies that aim to not only reach but overcome this critical point are crucial to building a margin of financial security and ensuring long-term economic health.
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