IDEA: Measure breakeven sales (BES) over time to see if you have a product mix, GP% or fixed cost problem?
Every company wants to breakeven at the lowest amount of sales possible. Many watch their sales each month and know the day that they have broke even, covered fixed costs and assuming the gross profit margin % has stayed the same, they will earn a profit for the month. This analysis also tells you over time what is going well (rising prices, dropping fixed costs, or rising GP %) and what is going badly (increased costs, dropping GP%). Measure your breakeven sales (BES) point every month (fixed costs/(1-actual gross profit %) = BES. Is it declining (fixed costs dropping? or gross profit % increasing or both) or increasing (fixed costs increasing or gross profit % decreasing or both). Measure the increase or decrease in fixed costs and also the change in gross profit %. What are those changes from and are they controllable or out of control? Breakeven sales will tell you when things are changing and will help to guide you to the problem that is causing it.