Page 89 - PM Integrated Workbook 2018-19

Cost Volume Profit Analysis

Step 4: Calculate the breakeven point in terms of the units of the products:

55,000 mixes × 2 = 110,000 balls

55,000 mixes × 1 = 55,000 racquets

Step 5 – Calculate the breakeven point in terms of revenue:

($8 × 110,000 batches) + ($4 × 55,000 racquets) = $1,100,000

Step 6 – Calculate the margin of safety:

Budgeted sales – breakeven sales = $1,250,000 – $1,100,000 = $150,000

Or as a percentage, ($1,250,000 – $1,100,000)/$1,250,000 = 12%

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