Week 19 - Accounting module
Break even = fixed costs / contributions per unit.
Contributions per unit = selling price per unit - variable costs per unit.
Margin of safety:
The margin of safety is calculated as follows:
Margin of safety = actual sales − break-even sales
For example, a business has a BEP of 100 products and has made 150
sales. Therefore:
Margin of safety = 150 – 100
= 50 products
This means the business is making profit on 50 of its items sold, and its
sales could fall by 50 items before the BEP were reached.
Break even = fixed costs / contributions per unit.
Contributions per unit = selling price per unit - variable costs per unit.
Margin of safety:
The margin of safety is calculated as follows:
Margin of safety = actual sales − break-even sales
For example, a business has a BEP of 100 products and has made 150
sales. Therefore:
Margin of safety = 150 – 100
= 50 products
This means the business is making profit on 50 of its items sold, and its
sales could fall by 50 items before the BEP were reached.
