Thursday, April 17, 2008

Margin of Safety Equation

The margin of safety is the additional budgeted (or actual) sales over the break-even volume of sales. The break-even point is the amount of sales when total revenue (TR) equals the total costs (TC) of a particular product or product line. Using the break even-point formula is useful for predicting how profitable a product will be when produced.

To calculate margin of safety, use the following equation:

Margin of safety = Total sales - Break-even sales

Related Information:

Calculate Break Even Analysis

No comments:

Popular Accounting Problems

The information on this site is for informational purposes only and should not be used as a substitute for the professional advice of an accountant, tax advisor, attorney, or other professional.