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Margin of Safety

Margin of Safety

Ano ba ibig sabihin ng “margin”. Diba ito yung linyang naghahati sa dalawang bahagi, ito yung dulo, hangganan. Ang concept nito ay kung ano yung hangganan mo para ikaw ay kumita. ERGO:

MARGIN OF SAFETY = SALES – BREAKEVEN SALES

Kada pisong lagpas mo sa Breakeven Sales, nakaka-contribute ka sa margin of safety, kasi mas “SAFE” yung pakiramdam

Example

mos1-1.png picture by joseph0487

Sa example na yan, kung papansinin mo, kung makakabenta ka ng worth ng Current Sales mo, “feeling safe” ka ng P4,286. Bakit, kasi P4,286 kang malayo from having an income of ZERO. Kaya sya tinawag na “MARGIN of SAFETY”.

MARGIN OF SAFETY / TOTAL SALES = MARGIN OF SAFETY PERCENTAGE

In the example above, the Margin of Safety Percentage is 4,286/10,000 = 42.86%


Gusto nyo ng magic? Hehehe

CURRENT SALES PRICE  x  CONTRIBUTION MARGIN RATE  x  MARGIN OF SAFETY PERCENTAGE = EBIT

10,000 * 35% * 42.86% = 1,500

cool diba? Hehehe. Walang magic dyan. Ganito ang logic nyan. Sa current sales, kinuha yung contribution margin. Nung nakuha na yung contribution margin, kinuha yung part ng contribution margin na nagbigay sayo ng “safe amount” para ang kita mo mas mataas sa Zero.

Gets?

Solve natin yung problem


Bell Company has a 25 percent margin of safety. Its before tax return on sales is 6% , and its tax rate is 40 %. Assuming the current sales are P120,000, what is Bell’s total fixed costs ?????

21,600

kung isusummarize natin yung data, eto sya:

75%                                25%

mos2.png picture by joseph0487

Sa MS, hindi kailangang mag-stick ka palagi sa formula. Kung may sarili kang diskarte sa pagsagot, okay yun, sundin mo yun, as long as tama. Gamitan ng logic, yun ang diskarte.

So, dito ang gagawin ko, hahanapin ko muna yung Contribution margin rate. Pero papano?

120,000 (CMR) –  90,000 (CMR) = 7,200

Bakit ko ginawa yun? Yung contribution margin ng current sales, minus the FIXED COST is equal to 7,200. E diba yung 90,000, yun yung breakeven sales. Kung iisipin mo, Breakeven sales times the contribution margin rate is equal to the Fixed cost since sa breakeven sales, ang net income ay zero. So 90,000 * CMR is the fixed costs

ituloy natin ung equation

30,000 (CMR) = 7,200

CMR = 24%

ayan, may CMR na tayo, mas madali na natin masosolve.

Sabi natin kanina Breakeven Sales times CMR equals FIXED COSTS so,

90,000 * 24% = 21,600

FIXED COSTS = 21,600

so, kung bubuuin natin yung table kanina:

MOS3.png picture by joseph0487

Magic ulit?

120,000 * 24% * 25% = 7,200

Alternative way of solving the problem:

Look for the CMR:

Sales * CMR * MOS = EBIT

120,000 * CMR * 25% = 7,200

CMR = 7,200/30,000

CMR = 24%

Compute for the Fixed Costs:

Breakeven Sales * CMR = Fixed Costs

90,000 * 24%  = P21,600 Fixed Costs

Sunod ko yung next 2 problems bukas, may tinatapos lang kasi ako ngayon. 🙂

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  1. ML
    December 8, 2009 at 2:07 pm

    thanks po!…sobrang nalinawan ako! And dami kasing variations ng problems sa CVP…

    • December 11, 2009 at 6:44 am

      Walang anuman! Ganyan talaga sa MS, maraming variations ang problems, ika nga ng Wish ko lang, “Walang Imposible…” hahahha!

  2. Anson keh
    December 11, 2009 at 10:57 am

    Very nice blog site! Keep it up! 🙂

  3. patrick
    December 11, 2009 at 3:38 pm

    sir! request po sana paki lagyan ng category/kahit label besides sa subj matter base sa subjects on board like p1, p2, MS etc. para madaling hanapin pag magrereview na hehe 🙂 nice work sir.

    • December 11, 2009 at 4:51 pm

      Your wish is my tupad! 😛 pag uwi ko galing opis, ayusin ko po 🙂 Thanks for the idea.

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