Formulas

• What is the formula for break even output?

  Fixed costs divided by contribution per unit
• How do you calculate contribution per unit?

  Selling price minus variable costs per unit
• What is the formula for total contribution?

  Total revenue minus total variable costs
• What is the margin of safety?

  Actual level of output minus break even output
• How might the margin of safety be part of a longer question?

  It may require calculating break even output first
• What are the key formulas related to breakeven analysis?

  • Break even output: Fixed costs / Contribution per unit
  • Contribution per unit: Selling price - Variable costs per unit
  • Total contribution: Total revenue - Total variable costs
  • Margin of safety: Actual output - Break even output