Accounting Lesson guide

Year 12
January 3 week 2024
rd

Lesson 4

Cost-Volume
Profit Analysis
Marginal Costing
 Margin of Safety
The margin of safety is the number of
extra units you are producing over your
Break-Even Point.
Formula:

Margin of Safety = Sales – Break Even Point

(in units)

Learning objectives:
• You should be able to calculate the margin of safety.

Marginal Costing
 Margin of Safety
150 cupcakes
PROFIT
100 cupcakes 100 cupcakes
MARGIN OF
SAFETY
= 100 – 50 Cupcakes
= 50 Cupcakes
50 cupcakes
BEP

LOSS
0 cupcakes

Learning objectives:
• YouCosting
Marginal should be able to calculate the margin of safety.
 Margin of Safety

Lets Revisit our Earlier Example:

Mary opens a cupcake bakery.

 She rents a kitchen to bake the cupcakes

which costs €100 per week.
 The cost of the ingredients is €1 per
cupcake.
 She sells the cupcakes for €3 each

If Mary sells 100 cupcakes, what is her Margin of

Safety?
Marginal Costing
Plenary – What did you learn this
lesson?

• 3 facts

• 3 key words

• 1 question to test your peers