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- This topic has 5 replies, 3 voices, and was last updated 9 years ago by John Moffat.
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- September 30, 2014 at 9:23 pm #202697
I am looking for help on the following question…
A company manufactures and sells a product XY, for £56 per unit. In March the budgeted volume was 7200 units, the margin of safety was 26.2%, the budgeted contribution to sales ratio is 21%
What is the budgeted fixed costs for March?
October 1, 2014 at 6:46 am #202726At breakeven, the contribution will equal the fixed costs.
So first you need to find breakeven sales volume. The margin of safety is (budget – breakeven) / breakeven x 100%.
So for every 100 breakeven, the budget must be 126.2.
Since the budget is 7,200, the breakeven volume must be 100/126.2 x 7200 = 5705.23Now you can calculate the breakeven sales revenue (at $56 per unit).
Then you can calculate the breakeven contribution – 21% of revenue – and this will be equal to the fixed costs.
October 2, 2014 at 5:55 am #203174Dear John,
Pls check your formular
The margin of safety is (budget – breakeven) / breakeven x 100%.The correct “the margin of safety is= (budget-breakeven)/budgetx100%
FC= $ 62,487.9?
October 2, 2014 at 7:13 am #203192Oooops!
Thank you Thuy – you are correct. (It was too early in the morning when I answered before 🙂 )
The correct figure for fixed costs is indeed $62488
October 2, 2014 at 7:57 am #203220Noted with thanks
October 2, 2014 at 9:21 am #203227🙂
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