CIMA P1 Syllabus C. Short-term Decision Making - Break-Even Point and Margin of Safety - Notes ^{2 / 6}

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)

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

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