Break-Even Point and Margin of Safety

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Break-Even (Units)

Every Sale makes a CONTRIBUTION towards FIXED costs.

Once the fixed costs are paid for by these sales then you break even:

So the break even point in units is Fixed Costs / Contribution (per unit)

Break-Even (Revenue)

Very similar to Break-even  (units) except instead of contribution in units it's contribution to sales ratio

So the break even point in units is Fixed Costs / Contribution to sales ratio

Margin Of Safety

The Margin of Safety is simply how many we predict to sell ABOVE the breakeven level

Achieving A Required Profit

NotesQuizPaper examCBEMock