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Hello sir,
It’s not very clear to me a mcq question from revision kit.
We have fixed costs, selling price per unit and budgeted units and is said variable c/s ratio=44%
Now breakeven sales are calculated as Fixed costs/56%, and the other clues are for margin of safety. Don’t understand why 56% and not 44%? thank you in advance
Although you do not say which question you are referring to, I think it probably says that the ratio of variable costs to sales is 44%.
In which case, it the sales are 100 then the variable costs are 44, and therefore the contribution is 100 – 44 = 56.
Therefore the CS ratio is 56/100 or 56%.Breakeven revenue is always fixed costs / CS ratio.
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(Our free lectures are a complete course for Paper F5 and cover everything needed to be able to pass the exam well.)Sir, thank you very very much, now i realise is a matter of reading carefully the question. That was very helpful to me. And your lectures are simply amazing.
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