Breakeven Analysis / Limiting Factor Analysis

Question 1

Breakeven Point

Answer 1

BEP = Total Fixed Costs / Contribution Per Unit

= TFC / CPU

Question 2

Contribution ratio

Answer 2

CS ratio = Total Contribution / Total Revenue

Or

= Contribution Per Unit / Selling Price per unit

Question 3

Breakeven Point in terms of sales revenue

Answer 3

BEP = Fixed Costs / Contribution ratio

Question 4

Margin of safety (%)

Answer 4

Margin of safety = (Budgeted output - breakeven output) / Budgeted output x 100%

Question 5

Margin of safety (units)

Answer 5

Margin of safety = Budgeted output - Breakeven output

Question 6

Sales volume for target profit

Answer 6

(Fixed costs + Target profit) / CPU

Question 7

Limiting Factor Analysis method

Answer 7

1) Calculate contribution per unit for each product
2) Calculate contribution per limiting factor for each product:

Contribution per unit / limiting factor per unit

3) Rank according to results of 2)
4) Allocate and determine the optimal production plan (remember to allocate the scare resource to the highest-ranking product first)