Critical point
Level of activity, where sales proceeds equals with total costs, is called as critical point. It can be expressed either in currency or as a number of products. At critical point, margin profit and fixed costs also equal, so it can be solved also with formula
With the formula
can be solved the sales in euros covering fixed costs.
Example 2.
How many tickets should students have sold for not to make any loss?
Option 1:
The ticket price includes also VAT, so the actual unit price is 13.64€
Unit margin profit for a customer is If the profit margin ratio is known, then the unit profit margin can also be solved with it as follows:
The fixed costs should be covered, so
Had they sold 57 tickets, they would have earned 549.48€. It is not enough. Thus, they should have sold 58 tickets.
Option 2:
This can be solved also with an equation, where sales proceeds and total costs equal: