(a) At break-even point, the contribution will be equal to (fixed costs) (b) Excess of budgeted revenues over the break-even revenue is called (Margin of Safety) (c) When there is no profit figures revealed under marginal and absorption costing are identical. (Inventories) Illustration 26 Metro Service Ltd. is operating at 70% capacity and presents the following information: Break-even point : 200 crore a57 368 EP-CMA : P/V Ratio 40% Margin of safety 50 crore Metro management has decided to increase production to 95% capacity level with the following modifications- - Selling price will be reduced by 8% The variable cost will be reduced to 55% on sales. The fixed cost will increase by 27 crore including depreciation on additions, but excluding interest on additional capital Additional capital of 50 crore will be needed for capital expenditure and working capital. You are required to calculate - () Sales required to earn 37 crore over and above the present profit and also to meet 20% interest on additional capital; () Revised break-even point; (iii) Revised P/V ratio; and (iv) Revised margin of safety