Recent Articles

Contribution Margin

Contribution margin equals price minus variable costs. It is a cost accounting concept and a fundamental principle of business. Most often used to identify the amount of dollars to offset fixed costs of operations.

Economies of Scale

02/07/2017

Of the basic business principles, economies of scale has the greatest impact on profitability over any other business principle.   As an enterprise’s investment is spread over higher volume the cost per unit of production decreases.   The [...]

Breakeven Analysis – Fundamentals

12/28/2016

Breakeven analysis is a managerial (cost) accounting tool used to examine the relationship of price to cost of a product.   It also considers various sales volumes and the effect on profit given the different relationships of price to cost.   [...]

Gathering Data from Sales

08/08/2016

In business the best source of new business is the existing customer.  Discovering the customer’s habits and characteristics allows the sales department to expand into new geographical territories with similar customer characteristics and/or [...]

Margins in Construction

05/06/2015

I’ve been asked to identify the average margins in the construction industry.  Honestly, there is no such thing.   I tried and after several hours of research I couldn’t even get one of the types of contractors to have consistency in their [...]

Marginal Revenue in Business

02/03/2015

The scholarly definition and reality are two different perspectives.  The student is taught that marginal revenue equals the additional dollars generated for an additional single unit of sales.  It is literally taken right down to the micro [...]

Fixed and Variable Costs in a Restaurant

01/12/2015

Many restaurant owners and managers do not understand the difference between their fixed and variable costs.  The problem with defining the two types of costs relates to their connection with sales.  In addition, reasonable assumptions have to be [...]

Mixed Costs

12/16/2014

Mixed costs are a more advanced business concept.  Mixed costs refer to a combination of both a fixed and variable component.  A common error made by most small business entrepreneurs is the misapplication of the formula.  Many small business [...]

Substitution Principle in Business

11/24/2014

There are a multitude of principles used in business, some are industry specific, others are functions of business.  But there is one that is a general principle that is used across the board in all areas of business.  It is called the [...]

People, Process & Product – The Profit

11/20/2014

Marcus Lemonis is the star of a TV series show called ‘The Profit’.  He helps failing business turn around and become successful operations by fixing the three core elements of every business.  He refers to these elements as the 3 P’s: [...]

Fixed Costs – Explanation and Examples

02/19/2014

‘Fixed costs’ is a business term used mostly in cost accounting.  It has several meanings based on its usage.  The most common definition associated with fixed costs is expenses that must be paid regardless of production or sales volume.  The [...]
1 2