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This graph shows how much in gross profit you can expect at each price
point. It factors in the per-unit cost of production that you supplied...
The x-axis remains the same. The y-axis shows the dollar value of the gross
profits from the gross sales that you would make for every 100 survey
respondents, at each price point. It is derived by subtracting the cost of
production for the total number of units that are sold at each price point
from the gross sales at the same price point.
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We talked earlier about entering your cost of production . The goal
right now is to figure out what price point (if any) will be most profitable. So
the figure that you enter for cost of production should reflect the status of your
product right now. What does that mean?...
Well, if you are at an early feasibility stage with no sunk costs right now, then
you should enter every pre-production capital cost (ex., R&D, equipment
expenses, studies, etc.) that will be needed to produce this product. Then
amortize that over a conservative estimate of the number of units that you will
produce.
But if you have already spent all that, and if you are just about to push the
button on production, all you have to do is enter a cost of production that is
consistent with the size of your production run. For example, if you will print
only 1,000 books, your per-unit cost might be $10. But if you make 20,000, it
might drop to $2. It’s important to enter a realistic amount. Don’t enter what you
hope it will cost -- enter reality.
To figure the final net profit, of course, you still have to plug in non-production