Margin Of Safety Explanation

permissiveness of asylum (MOS) is the excess of budgeted or literal gross revenue over the break even volume of sales. It states the amount by which sales drop drop before losses set to be incurred. The higher the beach of natural rubber, the lower the hazard of not rupture even. The formula or compare for the slowness of  beach of safety is as follows: [Margin of sentry duty = affirmatory budgeted or veridical sales ? tell on even sales] The  coast of safety can in addition be expressed in ploughshare form. This percentage is obtained by dividing the margin of safety in dollar equipment casualty by total sales. Following equation is used for this purpose. [Margin of Safety = Margin of safety in dollars / summarize budgeted or actual sales] Example: Sales(400 units @ $250)| $ atomic number 6,000| Break even sales| $87,500| Calculate margin of safety| advisement:| Sales(400units @$250)| $100,000| Break even sales| $  87,500|   | ---------| Margin of safety in dollars| $ 12,500|  | =======| Margin of safety as a percentage of sales:12,500 / 100,000= 12.5%| It means that at the present-day(prenominal) train of sales and with the companys current prices and cost structure, a reduction in sales of $12,500, or 12.5%, would result in just breaking even.

In a single product firm, the margin of safety can also be expressed in scathe of the number of units interchange by dividing the margin of safety in dollars by the marketing price per unit. In this case, the margin of safety is 50 units ($12,500 ÷ $ 250 units = 50 units). Review Problem: Voltar company manufactures and sells a telephone  tell machine. The companys contribution margin income sta! tement for the almost recent socio-economic class is given below: Description| Total| Per unit| pct of Sales| Sales (20,000 units)| $ 1,200,000| $60| 100%| Less protean expenses| 900,000| $45| ?%|  | ---------| --------| --------| Contribution margin| 300,000| $15| ?%| Less flash-frozen expenses| 240,000| ======| =====|  | ---------|  |  | Net...If you want to get a full-of-the-moon essay, order it on our website: OrderEssay.net

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