what is breakeven level of activities?
output level where profit and loss isn’t made.
what is the formula for breakeven point in units
total fixed costs / contribution per unit
how to calculate contribution per unit?
selling price - variable cost
how to calculate contribution?
selling price x contribution to sales ratio
contribution to sales (c/s)
contribution + sales value
selling price
variable cost / (100% - c/s ratio)
formula for level of activities to meet a target profit
units required to meet target profit = (target fixed costs + target profit)/ contribution per unit
calculation for profit at the breakeven lvl of activities
calculation of breakeven in monetary terms (c/s ratio)
break even sales revenue = total fixed costs/ c/s ratio
contribution to sales ratio per unit
contribution per unit / selling price per unit
contribution to sales ratio per unit
total contribution / total sales revenue
total contribution
total sales revenue - total variable costs
Define margin of safety
difference between the budgeted levels of activities and the breakeven point, indicates the expected profit levels.
Margin of safety formula
Budgeted sales (amount or units) – breakeven sales (amount or units)
Margin of safety % formula
Budgeted sales (amount or unit) – breakeven sales (amount or unit) / Budgeted sales (amount or unit)
profit
margin of safety x contribution per unit