Particulars Per Unit Amount

Sales - -
Less: Variable Cost (-) (-)
Contribution - -
Less: Fixed Cost -
Profit - -

P/v Ratio= Contribution or Contribution per unit or

Change in Profit
Sales * 100 Selling Price per unit * 100
Change in Sales * 100

Break Even Point (in units): Fixed Cost

Contribution per unit

Break Even Point (in Rs.): Fixed Cost

P/v Ratio

Margin of Safety: Total Sales – Sales at Break Even Point

Or
Profit
P/v Ratio

Margin of Safety in %: Margin of Safety

Sales * 100

If desired profit is given then:

Desired BEP (in units): Fixed Cost + Desired Profit
Contribution per unit

Desired BEP (in Rs.): Fixed Cost + Desired Profit

P/v Ratio
For Example:
Sales= Rs. 20000/-
Variable Cost= Rs. 10000/-
Fixed Cost= Rs. 6000/-
(a) Calculate P/v Ratio, Break Even Point and margin of safety
(b) Calculate the effect of:
 20% decrease in fixed cost
 10% decrease in variable cost

Soln:
Sales 20000
(-)Variable Cost (10000)
Contribution 10000
(-)Fixed Cost (6000)
Profit 4000

P/v Ratio= 10000

20000 * 100
= 50%

BEP (in Rs.)= 6000

50%
= 12000

Margin of Safety= Total Sales – Break Even Sales

= 20000 – 12000
= 8000

20% decrease in fixed cost:

P/v Ratio= 50%

BEP (in Rs.)= 4800

50%
= 9600

Margin of Safety= 20000 – 9600

= 10400