What is it that is sold to make a profit? Is it a piece of machinery, or a widget, or a material that is sold by the pound? How much more needs sold or produced to make up for the lost profit due to an injury? How many more units need sold or produced to reach the Additional Sales needed to recover the profits lost due to an injury?

 

Example 1: For one piece of custom machinery that sells for $10,000.00 and the profit on each machine sold is 10% of the selling price, the profit per machine is $1,000.00.  If an injury occurs during the fabrication of that one custom machine and the uninsured costs of that injury is $500.00, the company needs to make $5000.00 in additional sales to cover the cost of the injury, which equates to half of one custom machine. This means that the company needs to make the sale of one more custom machine (you can’t make half a machine and sell it) than was originally planned to realize, at least, the same amount of profit that was originally planned, or suffer a loss in profit.

 

Example 2: For a widget that sells for $100.00 each and the profit earned on each widget is 5% of the selling price, the profit per widget is $5.00. If an injury occurs during the manufacturing process of the widget with the indirect cost of $200.00, the company needs to make an additional $4,000.00 worth of widgets to cover the lost profit. This equates to an additional 40 widgets.

 

Example 3: For a material sold in pellet form for $2.50 per pound, the profit per pound is 5% of the selling price, the profit per pound is 12.5 cents. If an injury occurs that costs $1,000.00, the company needs to make an additional $20,000.00 or an additional 8,000 pounds of pellets.

 

Formula for Additional Units:

Additional Units = Additional Sales/Unit Price

Example: 8000 Additional Units = $20,000.00 Additional Sales/$2.50 per Unit