Audit and economical analysis

Income-VC= MP-FC = Profit

Here,

MP– marginal profit

VC - variable costs, that is:

• 
  rent;
  
• 
  permanent salary;
  
• 
  advertising costs;
  
• 
  utility costs;
  
• 
  insurance costs;
  
• 
  insurance premiums;
  
• 
  taxes;
  
• 
  depreciation deductions.
  

FC - fixed costs, that is:

• 
  raw materials;
  
• 
  remuneration for labor;
  
• 
  technical support;
  
• 
  bonus payments and so on.
  

Each company attaches great importance to the calculation of expected rates of return and assessment of business performance in the production process (work, service).  Setting a rate of return is a more complex problem in a free market economy.   The calculation should cover various risks (risks).

The complexity of the computational rate of return lies in the fact that changes in resources, prices of goods, taxes and payments can be changed without the participation of the firm or company.   It is possible to do the calculation when they have a clear source.   This source may affect inflation, price changes, changes in production costs (due to changes in product size and prices for resources).

The determination of the critical volume level is considered in the following cases:

• 
  when the company is re-established;
  
• 
  future production and marketing research   analysis
  
  • 
    preparation of a decision on the production of a new product or abandonment of an old product;
    
  • 
    modernization of production;
    
  • 
    product development
    
• 
  routes for responding to critical size analysis:
  
  • 
    can I reduce the damage?
    
  • 
    is the capacity increasing or decreasing?
    
  • 
    will it increase or decrease?
    
  • 
    what are the actual and variable costs?
    

The critical size is calculated based on the number of fixed and variable costs and product sales.

To achieve a corresponding sales volume, you need to create an evaluation unit.   After determining the rating block, the critical volume level will be taken into account.   If the result is not satisfactory, the rating will be correlated, and the degree calculation will be performed again.   Measures to reduce the cost of the product will be taken into account if the projected level of marginal profit is not reached.

At the end of the analysis, the final calculation of vulnerability will be calculated, and the financial plan of the enterprise will be determined at periodic intervals.

The purpose of analyzing a critical level of volume is to determine the potential for profit.   The ability to have positive cash flows is also known if the company has the ability to earn profitability.

How to calculate fixed and variable costs?   These costs are calculated by examining the cost of accounting for the product separately from the calculations.

In determining the critical level of international practice, the following methods of analytical activity are identified.

1. 
   Costs vary and vary.
   
2. 
   Critical production level determined.