Determine Your Minimum Monthly Profit

by Craig Anthony

0 min read

Minimum monthly profit is another term for a business’ break-even point. This number shows the minimum number, in dollars, that must be made to keep the business operating each month. Assuming a company sells one product, the steps involved in finding the minimum monthly profit are:

  1. Calculate the contribution margin, which is revenue per unit less variable expenses per unit, divided by revenue per unit.
  2. Divide total monthly expenses by the contribution margin to get break-even sales.

Assume a company generates $24 per unit of product sold and has variable expenses of $9 per unit. The contribution margin is:

($24 – $9) / $24 = 62.5%

Next, assume the company has $2,400 in fixed expenses per month and wants an MMP of $1,200. This totals $3,600. Thus, the break-even point in sales is:

$3,600 / 62.5% = $5,760 per month.

References & Resources

Related Articles

Understanding Cost Behavior Classifications

All expenses of an organization can be classified as variable costs, fixed…

Read more

Internal Reporting Options: Variable Pricing Versus Absorption Costing

Materials, labor, and overhead are combined to make products to sell. The…

Read more

How to Measure the Effectiveness of Your Business Model

It is critical that small business owners, financial advisors, and investors are…

Read more