Why all this attention even to small change?

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Simply because before starting a new business, whether it is a large company or a second job that you do online, it is very important to do a careful cost analysis. An incorrect forecast, in fact, could cost you in terms of time and money.

If you buy a large quantity of raw materials to make your t-shirts (accessories to decorate and personalize them, pieces of fabric, etc.), or a new printing machine (for example, if you decide not to use the print on demand system ), to cover your expenses and make a profit you will have to sell all your products in a relatively short time.

If this does not happen, you will not have a profit margin and your business will be at a loss.

Hence the importance of the concepts of fixed cost and variable cost that allow you, together with other values ​​and through a formula, to calculate your profit margin in percentage, which is fundamental for the life of your business.

So, let's take another step forward to understand what other netherlands email list values ​​go into making up the profit margin.

Total costs
Simply put, total costs (TC) are given by the sum of variable costs and fixed costs .

CT = CV + CF

In the graph below you can see how the total cost curve is represented. If you look carefully you will see that the total cost curve is parallel to the variable cost curve but shifted higher on the cost axis, especially at the intersection with the fixed cost curve.

total costs profit margin

This is because variable costs can start from zero and increase gradually: if I produce zero products, clearly I will have zero costs related to production. As production increases, CVs will also increase and therefore the curve we see in the image above will form.

With total costs this does not happen because, while variable costs start from zero, total costs, including fixed costs, start from an already higher value, regardless of production.

And that's why the total cost curve is practically a translation of the variable cost curve.