A Proven Formula
to Run Numbers
for Any Business
Investment

A practical example worksheet at your fingertips to run numbers for the application of any business investment:

Sales = X
Variable Costs = Y
Fixed Costs = Z

Variable Cost Margin

Y ÷ X x 100 = Variable Cost Percentage
100% – Variable Cost Percentage = Contribution Margin
Z ÷ Contribution Margin = Breakeven Sales Required

Example

A restaurant and catering company is looking to purchase two new delivery vans @ $60,000 each − a total cost of $120,000 (including dealer and on-road costs).

Their current performance is:

  • Sales $2,350,650
  • Variable Costs $1,481,290
  • Fixed Costs $361,800

They are looking to lease the vehicles over a three year term with a 40% balloon payment @ 5.6%.

Therefore lease repayments will be approximately $4,856.49 per month.

Variable Cost Percentage = $1481,290 ÷ $2,350,650 X 100 = 63.0%
Contribution Margin = 100% – 63% = 37%
Sales required to cover lease payments = $4,856.49 ÷ 37% = $13,125 per month or $157,500 per annum

This amounts to an increased turnover of 6.7% to maintain current profitability.

This could then equate to the number of deliveries required each year knowing the average value of an order.

Topicsheets

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Disclaimer: This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. © 2021