topic 6 formulas

Contribution per unit

Sales price - variable cost per unit

break-even point (units)

=fixed costs / contribution per unit

Target Profit

Fixed costs + target profit / contribution per unit

Total profit

Profit = total revenue (sales volume x selling price) - total variable costs - total fixed costs

Shortened formula for total profit

Profits = margin of safety x contribution per unit

Margin of safety (units)

Margin of safety (units) = actual (or budgeted) sales - break-even sales

breakeven point in pounds

Breakeven point in pounds (revenue) = BEP units x selling price

Break-even point

BEP is where total contribution = total fixed costs

sales required (units)

Sales required (units) = (fixed costs + target profit) / contribution per unit

margin of safety (revenue)

Margin of safety (in revenue) = expected sales - break-even revenue

C/S ratio (contribution to sales)

contribution per unit / selling price x 100

sales revenue at break-even point

= break even units x selling price unit

OR

=fixed costs / C/S Ratio