Erin wrote to me from the States with what looked like desperation. Erin has a problem in which he's been given some information on costs, profits and so on and has to deduce the sales value. The information Erin was given is: Margin of safety: 25% Fixed Costs: $600,000 Variable Costs: 60% of sales The question is to determine the dollar value of the sales based on the above information. I put my answers into a spreadsheet, but here's a summary which consists of restating the information given and then working down the logic of the solution: MOS 25.0% VC 60.0% FC 600000 Contribution = S - VC C/S Ratio = (S - VC)/S 40.0% BEP = FC/C/S Ratio 1500000 MOS = Sales - Break Even Point 25% = 100% - BEP therefore BEP = 75% therefore Sales = BEP/75% Sales = 1500000/75% Sales = 2000000 If that's not clear and you're keen to sort it out, write to me at duncan@duncanwil.co.uk and we can discuss it. DW