Administrative Expenses

These include the monthly costs such as rent, electricity, mobility, office supplies, etc. In some cases this also includes the administrative personnel.

To sum this up, in order to obtain the production costs for 350 liters of banana vinegar a month, you will need to add the variables and the fixed costs.

Determining the sales costs
In order to determine the unitary sale price you will need to know the unitary cost of the product.

The unitary cost is the elaboration expense of one bottle of vinegar. It can be calculated in the following way:

Production cost is equal to the unitary cost.

Then calculate the total amount of units you are going to produce.

If the unitary cost is of $0.75 and if the price of your competition is of $1.70, and your product is in demand, the price of your product could be of $1.50.

You will also need to consider the following:

• The unitary price of the product.
• The price of your competition.
• The product demand.
• The purchasing capacity of the market.
• The payment facilities offered.
• The time in which you are hoping to recover investment costs.

All these are equal to the unitary price of the sale.

If your clients can pay the price you offer, you will soon recover your investment.

If your price is good, you will not have a lot of competition, especially if the product has good quality.

Determining the equilibrium point
The equilibrium point determines the minimum amount of units that need to be sold to cover the production costs. Over this level, the company obtains utilities, if it goes under, the company losses.

Knowing the equilibrium point will allow you to know the minimum amount of units that need to be produced, study the varied price probabilities, plane the sales, and calculate how much money is needed.

For example, lets suppose that the unitary price of each bottle is of $1.50, according to the previous calculations made. First calculate the unitary variable costs.

Example:

• Total variable cost: $644.84
• Units to be produced: 1000
• 644.84: 1000 = $0.644
• Unitary variable cost = 0.64

Minimum units =

Fixed price

Unitary sale price – variable unit cost

This would mean that you would not be able to sell less then 126 bottles, because to the contrary the company would end up losing.

 

Desserts Recipes Administrative Expenses