Page 62 - P1 Integrated Workbook STUDENT 2018

Chapter 4

Calculate the following:

 the break-even point in sales units per month

 the margin of safety for next month

 the budgeted profit for next month

 the sales required to achieve a profit of $96,000 in a month.

Solution

Breakeven point

Calculate fixed costs: OAR × budget units

Fixed costs = $12 × 2,000 = $24,000

Calculate contribution per unit: sales price – variable costs

Contribution per unit = $120 – $22 – $36 – $14 = $48

Breakeven point = $24,000/$48 = 500 units

Margin of safety

Planned units – break even units

= 2,200 – 500 = 1,700 units

Calculate as a percentage:

Formula: MOS in units/planned units × 100

= 1,700/2,200 × 100 = 77%

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