Question

calculate margin of safety from the following details:
sales 12,00,000 contribution 6,00,000
Fixed costs 4,00,000​

Answer 1

Explanation:

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Answer 2

Answer:

Margin of safety = 4,00,000

Explanation:

Solution :

Margin of safety (M/S) =

$\sf{\dfrac{Profit}{Profit \: Volume \: Ratio}}$

★ P/V Ratio =

$\sf{\longrightarrow{\dfrac{Contribution}{Sales} \: \times \: 100}}$

$\sf{\longrightarrow{\dfrac{6,00,000 }{12,00,000} \: \times \: 100}}$

P/V Ratio = 50%

★ Profit =

Profit = (Sales × Profit Volume Ratio) - Fixed Cost

OR

Profit = Contribution - Fixed Cost

Profit = 6,00,000 - 4,00,000

Profit = 2,00,000

★ Margin of safety =

$\sf{\longrightarrow{\dfrac{Profit}{Profit \: Volume \: Ratio}}}$

$\longrightarrow{\sf{\dfrac{2,00,000}{50\%}}}$

Margin of safety = 4,00,000

∴ Margin of safety = 4,00,000