Question

If production capacity is lower than sales how we calculate profit

Answer 1

If production/sales is increased beyond this level, there shall be profit to the ... Computation of the Break-Even Point: ... B.E.P (as % age of capacity) = Fixed Cost/Total Contribution.

To figure the profits as a percentage of sales, divide your profits by your total sales in a specific period and multiply the result by 100. For example, if your company brings in $500,000 in sales a year and $100,000 is profit, divide $100,000 by $500,000.

Answer 2

Businesses and individuals across the globe perform for-profit economic activities with an aim to generate profits. However, absolute numbers - like $X million worth ofgross sales, $Y thousand business expensesor $Z earnings - fail to provide a clear and realistic picture of a business’ profitability and performance. Several different quantitative measures are used to compute the gains (or losses) a business generates, which make it easier to assess the performance of a business over different time periods, or compare it against competitors.

Profit margin is one of the commonly usedprofitability ratios to gauge profitability of a business activity. It represents how much percentage of sales has turned into profits. Simply put, the percentage figure indicates how many cents of profit the business has generated for each dollar of sale. For instance, if a business reports that it achieved 35 percent profit margin during the last quarter, it means that it had a net income of $0.35 for each dollar of sales generated.

While proprietary businesses, like local shops, may compute profit margins at their own desired frequency (like weekly or fortnightly), large businesses including listed companies are required to report it in accordance with the standard reporting timeframes (like quarterly or annually). Businesses which may be running on loaned money may be required to compute and report it to the lender (like a bank) on a monthly basis as a part of standard procedures.