🎯Cost-Volume-Profit (CVP) Analysis
Margin of Safety
Actual Sales - Break-Even Sales = Margin of Safety
What It Means
Your cushion—how much sales can drop before you lose money.
Example
Actual Sales:$400,000
Break-Even Sales:$250,000
$400,000 - $250,000
Margin of Safety = $150,000
→ Sales can drop $150,000 before hitting break-even
Related Formulas
Contribution Margin per Unit
Sales Price per Unit - Variable Cost per Unit = Contribution Margin per Unit
Contribution Margin Ratio
Contribution Margin ÷ Sales × 100 = CM Ratio %
Break-Even Point in Units
Fixed Costs ÷ Contribution Margin per Unit = Break-Even Units
Break-Even Point in Sales Dollars
Fixed Costs ÷ Contribution Margin Ratio = Break-Even Sales $
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