Example 1 · level 1
Reddy Cements: actual sales ₹10,50,000, break-even sales ₹6,10,000. Find the margin of safety (₹).
Show solution
- MOS = ₹10,50,000 − ₹6,10,000 = ₹4,40,000.
Answer: ₹4,40,000
CA INTERMEDIATE: COSTING & FM · MARGINAL COSTING
Margin of safety
Margin of safety = Actual sales − Break-even sales = Profit ÷ P/V ratio. MOS % = MOS ÷ Actual sales × 100.
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Worked examples
Example 2 · level 2
Reddy Cements earns a profit of ₹1,32,500; its P/V ratio is 25%. Find the margin of safety (₹).
Show solution
- MOS = ₹1,32,500 ÷ 0.25 = ₹5,30,000.
Answer: ₹5,30,000
Example 3 · level 3
Mehta Polymers: sales ₹10,30,000, fixed cost ₹2,08,000, P/V ratio 40%. Find the margin of safety as a % of sales (two decimals).
Show solution
- BEP = ₹5,20,000.
- MOS = ₹10,30,000 − ₹5,20,000 = ₹5,10,000.
- MOS % = 5,10,000 ÷ 10,30,000 × 100 = 49.51%.
Answer: 49.51 %