Margin of Safety
Margin of safety represents the strength of the business. It enables a business to know what is the exact amount it has gained or lost and whether they are over or below the break even point.[3]
margin of safety = (current output - breakeven output)
margin of safety% = (current output - breakeven output)/current output x 100
When dealing with budgets you would instead replace "Current output" with "Budgeted output".
If P/V ratio is given then profit/ PV ratio
Formula:
Breakeven Point = Total Fixed Cost/Contribution Per unit
= Contribution required to break even/Contribution per unit
Contribution/sales ratio = Contribution/Sales * 100%
Required Contribution = Fixed Cost
Sales Revenue at BEP = required Contribution/(C/S) ratio
· Required Contribution = Target Profit + fixed cost
Required Sales= Required Contribution/Contribution Per unit
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ReplyDeleteThank you Mr. John Milton.
DeleteI will try to give your requirement.
Sorry for late reply.