Dec 13 Q1

BEP = FC/Contribution per unit. However, some information is given per unit and some per $m. The answer has revenue and costs in $m, so material cost = $90 x 1.12m = 101 etc as shown in the answer For Cheerful: Contribution/unit = (448 - 67 - 45 - ........)/1.12 = 162/1.12 = 144.64 BEP = 120m/144.64 = 0.83m Forecast sales = 1.12 x 1.04 x 1.04 = 1.21m (for two years' time) Sales can fall by 1.21 - 0.83 = 0.38m units before break even is reached. The margin of safety is therefore 0.38/1.21 = 31% [no idea how ACCA got 26%]