If Margin of Safety is Rs.100,000 and PV ratio is 20% and Fixed Costs are Rs.60,000, then what is the level of profits?

Margin of Safety (in amount) = Profit/ PV ratio  100,000 = Profit/20% Or Profit = 100000*20% = 20,000 At Break Even Sales, the organization earns no profits, and beyond this point, the organization earns profits because the entire costs are recovered at Break Even Point. Therefore, this is the safety margin for an organization. Beyond, Break Even point, Total Revenues exceed Total Costs, therefore contribution contributed by each additional unit, contributes to the profit