MGT 5 Lecture Notes - Lecture 9: Profit Margin, Weighted Arithmetic Mean
15 Nov 2018
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Atni (fc+(at/(1-tr))/cm per unit = sales units (fc+(at/1-tr))/cm% = sales $ 100% sp = 80 price per unit. ** assume for this problem that pt = 0 (this is what is needed to get to the break even point) ** at the break even point, at (1-tr) = 0. Since cm = fc, you know that you reached the break even point. How do we reach a profit margin of ,400? (fc + (at (1-tr))) cm units = units (259,200 (134,400/(. 7)))/48 = 9400 units (259,200 (134,400/. 7))/60% = ,000 total sales revenue. The buffer between the current level of activity and the break even point. Used as a safeguard when something bad could happen and you need to figure out how many sales you could afford to use (at/(1-tr))/cm = margin of safety (134,400/. 7)/48 = 4,000 units. Margin of safety when your profit is 134,400 is 4,000 units.
