# Accounting Variances

Breakeven Point
Break Even Point = the sales volume which will give a company zero profit
Breakeven occurs when total contribution = fixed costs
Contribution per unit = selling price less all variable costs per unit

No. of units to breakeven:
Total Fixed Costs
----------------------       = no. of units   (how many units you need to sell in order to break even)
Contribution per unit

Sales Revenue to breakeven:
Total fixed costs
______________         x selling price per unit
Contribution per unit

Alternative way to find breakeven point is the C/S Ratio or P/V Ratio: gives the amount of contribution earned per pound of sales
contribution
__________   x 100 = %
Sales

Margin of Safety
the difference in units between the budgeted or actual sales volume and the breakeven sales volume and its expressed as a % of the budgeted or actual sales volume.

Margin of safety (units) = budgeted or actual sales (units) – breakeven point (units)

Margin of safety (%) = budgeted or actual sales (units) – breakeven point (units)
___________________                       x 100 = %
budgeted or actual sales units

Target Profit Level
How many units do we need to sell to reach our target profit levels?
Its like an additional fixed cost on breakeven:
Target profit = target profit + fixed costs
______________________
Contribution per unit

Variances

Material Variances

Total material variances is about the no of units at the expected price per unit, compared to actual price per unit x no. of units

Material price variances is the amount of material used (kgs, litres etc) x by the standard price per material compared to actual price for material

Material usage variances is the no of units made x the standard amount of material per unit, compared to actual amount of...