Question

In: Accounting

Given you are constrained to your house due to Covid-19 you have decided to try and...

Given you are constrained to your house due to Covid-19 you have decided to try and launch your own small business.
Required (200 words):

c.Workout your Breakeven point, showing all calculations.
d.Assume you require a profit of $25,000, calculate your new breakeven point, showing all calculations.
e. Define and calculate the ‘Margin of Safety’, in both units and dollars, assuming you sell 75,000 units. Ensure you include all calculations.

Solutions

Expert Solution

I will start business of running a small restaurant with $2 per plate meal which costs $1 for me. Total fixed cost of setting business is $ 3,000
1 Breakeven point Fixed Cost
Gross Profit
       3,000 i.e 3,000 units
2 Profit required is $25,000
Gross profit per plate $ 1
Unit to be sold for profit                25,000 Units
New Break even point                28,000 Units
3 Margin of safety (Rs.) Sales- break even sales
            1,44,000 USD
Margin of safety unit                72,000 Units

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