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    Cost Volume Profit Analysis, Break Even

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    The launch of a new product is under consideration. Its unit variable costs will be £30 and it is estimated that incremental fixed costs of £250,000 will be incurred if production is commenced. Forecast sales are 50,000 units. At what level of price for the new product will the organization break even? If the actual planned selling price is £48 per unit, what will be the organization's margin of safety?

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    For the organization to breakeven, the contribution margin must equal Fixed Costs

    Since the Contribution Margin = Selling Price - Variable Costs

    Therefore, at the 50,000 forecasted sales level:

    Variable costs = 50,000 x ...

    Solution Summary

    Step by step solution showing formulas as to how to calculate breakeven point as well as the margin of safety.