$192,600 0.382 $504,188

Antoinette needs $504,188 in sales revenue just to break even. That is $104,188 more than she expects the first year and $4,188 more than she expects for the second year. Despite her enthusiasm and determination, Antoinettes first reaction to this news is to panic and consider giving up. After some reflection, she re-examines the calculations to make sure she hasnt made a mistake in her arithmetic. Then she starts considering her options. Should she abandon her idea and work for someone else? Should she proceed with her loan application and fudge figures to show a profit? Or is there some other alternative?

In any business, only these things can improve profits:

you can increase the sales revenue by selling more of your product or service     you can reduce fixed costs     you can increase the gross profit percentage by raising selling prices or by lowering your product cost.

Lets see how Antoinette applies that knowledge to her break-even analysis.

First, Antoinette thinks about increasing sales. Maybe she was too conservative in her original sales forecast. What would happen if she increased her annual sales forecast by $150,000 (to $550,000) and kept the same fixed costs and gross profit margin? That is more than the break- even sales and should be enough to give her a profit for her efforts. How much profit? Lets see.

Break-Even Sales Revenue Forecast for Antoinettes Dress Shop

Revision 1:

Increase Sales Volume to $550,000

Annual sales $550,000

Annual fixed costs 192,600

Gross profit 0.382

Break-even sales

($192,600 divided by 0.382) 504,188

Sales over break-even