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
In the previous example, the fixed costs were 550€ and the profit margin 71%.
Example 2.
How many tickets should students have sold for not to make any loss?
Case1:
The ticket price includes also VAT, so the actual unit price is
Unit margin profit for a customer is 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.
Case 2:
This can be solved also with an equation, where sales proceeds and total costs equal:
As seen, the same equation is just formed in different ways.