How to Calculate Net Benefits

Calculating net benefits is a function of business finance.

Net benefit is a term that is used frequently in business finance. The net benefit calculation allows a company to analyze how much profit was made from a specific product. This type of calculation takes concepts such as direct costs and indirect costs into consideration, as well. Understanding the net benefit from certain products helps a company to make future financial decisions concerning budgeting and production.

Things You'll Need

• Calculator

Instructions

1. Determine all of the direct costs associated with a product. Direct costs include any money spent specifically for the production of an item. These costs might include factors such as supplies and salaries.

2. Determine all of the indirect costs associated with a product. Indirect costs include money spent on the specific item along with other items, as well. For instance, a building a might be used to make multiple types of products. The rent and utilities for that building could be considered indirect costs for any of the products being made there.

3. Add the indirect costs and the direct costs to find total cost.

4. Subtract the total cost of the product from the gross amount made from the product in order to find the net benefit. For instance, if gross sales of a product were $50,000 and total costs were $10,000, then the net benefit would be $40,000.

References

• Karl Kapp Institute for Interactive Technologies: White Paper--Performance Based ROI