ECONOMICS

COST ACCOUNTING

COST VOLUME PROFIT ANALYSIS

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
If margin of safety is 25% of sales, BEP will be ____ % of sales
A
50
B
75
C
25
D
60
Explanation: 

Detailed explanation-1: -What is the Margin of Safety Formula? In accounting, the margin of safety is calculated by subtracting the break-even point amount from the actual or budgeted sales and then dividing by sales; the result is expressed as a percentage.

Detailed explanation-2: -To calculate the break-even point in units use the formula: Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit) or in sales dollars using the formula: Break-Even point (sales dollars) = Fixed Costs ÷ Contribution Margin.

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