Breakeven Analysis and Limiting Factor Analysis

Question 1

What is contribution formula?

Answer 1

Sales revenue-variable costs

or Selling Price per unit - VC per unit

Question 2

How do you calculate fixed costs?

Answer 2

Revenue minus variable costs or

no. units sold x contribution per unit

Question 3

How do you calculate the number of units sold to break even?

Answer 3

fixed costs/contribution per unit

Question 4

How do you calculate breakeven revenue?

Answer 4

breakeven units x SP per unit

Question 5

2nd way to calculate breakeven revenue?

Answer 5

fixed costs/(revenue per unit- VC per unit)

Question 6

What is the margin of safety?

Answer 6

indicates the % by which forecast revenue exceeds or falls short of that required to breakeven (essentially shows how much sales would need to drop by before a loss is made)
can be shown in units or %

Question 7

Margin of Safety in units?

Answer 7

Budget sales units-breakeven sales units

Question 8

Margin of safety (%)?

Answer 8

(budget sales units minus breakeven sales units)/ budgeted sales units

Question 9

How to calculate target profit?

Answer 9

units sold to achieve target profit= (fixed costs + target profit) / contribution per unit

Question 10

How to calculate required revenue for target profit?

Answer 10

(Fixed costs + target profit) / C/S ratio(the contribution per unit divided by revenue per unit)