ECR Exam Margin of Safety

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    Break even in terms of sales revenue is Fixed Costs divided by Profit Volume.
    But had a brain block in exam and totally forgot the formula
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    I thought it was fixed costs divided by contribution per unit, then times your answer by the selling price? (Or am I being stupid & it's the same thing???)
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    Have had a look in text book and it says
    Break-even point (£) = Fixed Costs/ Profit volume.
    I did it the other way cos I couldnt remember the formula, but the answer is only £4 different and I dont think it makes much difference to margin of safety %.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    :)
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    can someone tell me what the correct basis for the apportionment of the power was?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    I apportioned it on machine hours but dont know if it was right.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    Think you can use either calculation for breakeven in terms of sales revenue - FC/PVR and FC/Contribution per unit X SP per unit both give the same result.

    But as we had already worked out FC/Contribution per unit, I just multiplied by the selling price.(£6, I think).

    Carole
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    I changed my mind abt machine hrs because machine hours figured in the next question abt OAR. Never mind
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    I also apportioned power using machine hours, but I have read on another posting that someone said it was allocated and not apportioned as the figures were given for both departments in the question (but I must have missed that - ah well....)

    Carole
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    I dont remember the figures being given to straight allocate the power, but I wasn't sure hours was a correct basis, but several people have said that is how they did it.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    I wasn't sure whether machine hours (and labour hours) were given to just calculate the OAR. So I was torn between floor area and machine hours - as I didn't see anywhere that they had given us actual figures to allocate.

    I guess it's only a couple of marks lost if we did it wrong.

    Carole
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    I was torn too, but sounds like I opted for the wrong one with Floor space, but I hadn't seen one anywhere before done on hours
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    The breakdown of overheads said "Power (for cooking & packing depts)" - sorry, can't remember exact names - and the machine hours were noted only for those depts. That, together with the mention of OAR being based on machine hours, made me apportion using machine hours.

    re: payback - I got something round 1.8 years as well, and rejected on basis of co. policy, despite the positive NPV.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    Sandy recommmended using machine hours for power - and thats good enough for me. :D
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    Well done. I have Sandy's answers too, and fingers crossed that was my only slip up.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    I don't know about you, but I can't remember the actual figures I used for most of the answers. But I've told myself (many times until I'm now convinced) that my answers looked like Sandy's

    :D LOL (I shall sleep well tonight...I hope)

    Carole
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    So do you think we have dissected the paper and wracked our brains about our answers enough? and now we should enjoy the summer..............
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR Exam Margin of Safety

    YEP! you've convinced me (not that I needed much convincing)! That's me in the garden tomorrow, relaxing with a cool drink (non alcoholic of course - LOL)

    Roll on the summer :D

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