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Comprehensive Report: Break - Even Analysis and Margin of Safety 1 . Break - Even Analysis: a ) Calculation of Break - Even Point: Formula
Comprehensive Report: BreakEven Analysis and Margin of Safety BreakEven Analysis: a Calculation of BreakEven Point: Formula of BreakEven Point in units: BreakEven Point in units Total Fixed Costs Selling Price per UnitVariable Cost per Unit Given: Selling Price S$ Variable Cost VC$ Total Fixed Costs $ BreakEven Point $ $$ $ $ units b Calculation of Target Profit: Given: Target Profit $ Target profit in units Total Fixed Cost Target Profit Selling Price Per Unit Variable Cost Per Unit Target Profit $$ $$ $ $ units Margin of Safety: Explanation: The gap between the breaking point and the real or forecast amount of sales is known as the margin of safety. It shows the maximum sales decline that a business can experience before losing money. The formula for Margin of Safety: Margin of SafetyActual SalesBreakEven Sales Actual Salestimes For Global Foods Inc.: Actual Sales Target Profit Sales units BreakEven Sales units The margin of Safetytimes times Margin of safety
Comprehensive Report: BreakEven Analysis and Margin of Safety
BreakEven Analysis:
a Calculation of BreakEven Point:
Formula of BreakEven Point in units:
BreakEven Point in units Total Fixed Costs
Selling Price per UnitVariable Cost per Unit
Given:
Selling Price S$
Variable Cost VC$
Total Fixed Costs $
BreakEven Point $
$$
$
$
units
b Calculation of Target Profit:
Given:
Target Profit $
Target profit in units Total Fixed Cost Target Profit
Selling Price Per Unit Variable Cost Per Unit
Target Profit $$
$$
$
$
units
Margin of Safety:
Explanation:
The gap between the breaking point and the real or forecast amount of sales is known as the margin of safety. It shows the maximum sales decline that a business can experience before losing money.
The formula for Margin of Safety:
Margin of SafetyActual SalesBreakEven Sales Actual Salestimes
For Global Foods Inc.:
Actual Sales Target Profit Sales units
BreakEven Sales units
The margin of Safetytimes
times
Margin of safety
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