Where F is the applied force and A is the cross-sectional area over which the force acts. Stress is the force carried by the member per unit area, and typical units are lbf/in 2 (psi) for US Customary units and N/m 2 (Pa) for SI units: Source: Silva Sansoni, вЂњThe Starbucks of Soup?вЂќ Forbes, July7, 19997, pp.90-91.When a force is applied to a structural member, that member will develop both stress and strain as a result of the force. This gives the store a comfortable margin of safety of 45%. With this information we can determine that the break even pointВ is about $385,000 of sales. Sales = Variable expenses + Fixed + Profits If so, what are their fixed expenses? We can answer that question using theВ equationВ approach as follows: So their variable expenses ratio is one-third ($2 cost / 6$ selling price). They report that it costs about $2 per serving to make the soup. Melwani and Hathiramani report that in their first year of operation, they netted $210,000 on sales of $700,000. For $6 per serving, Soup Nutsy offers 12 homemade soups each day, such as sherry crab bisque and Thai coconut shrimp. Instead of giving up, the two hired a French chef with a repertoire of 500 soups and opened a store called Soup Nutsy. Ali Yeganeh, whose loyal customers put up with hour-long lines and вЂњsnarling customer service.вЂќ Melwani and Hathiramani approached Yeganeh about turning his soup kitchen into a chain, but they were gruffly rebuffed. **We know that break even is the level of sales where profit is zero In BusinessВ | Soup Nutsy Pak Melwani and Kumar Hathiramani, former silk merchants from Bombay, opened a soup store in Manhattan after watching a Seinfeld episode featuring the вЂњsoup Nazi.вЂќ The episode parodied a real life soup vendor. Sales = Variable expenses + Fixed expenses + Profit *The break even sales have been calculated as follows: Margin of safety percentage = Margin ofВ safety inВ dollarsВ /В Total sales Margin of safety =В Total salesВ вЂ“ Break even sales * Required: margin of safetyВ of safety both inВ dollarsВ and percentage form. The companyвЂ™scontributionВ margin income statement for the most recent year is given below: Voltar company manufactures and sells aВ telephone answering machine. In this case, the margin of safety is 50 units ($12,500 Г· $ 250 units = 50 units). In a single product firm, the margin of safety can also be expressed in terms of the number of units sold by dividing the margin ofВ safety inВ dollarsВ by the selling price per unit. It means that at the current level of sales and with the companyвЂ™s current prices and cost structure, a reduction in sales of $12,500, or 12.5%, would result in just breaking even. Margin of safety as a percentage of sales: FollowingВ equationВ is used for this purpose. This percentage is obtained by dividing the margin ofВ safety inВ dollar terms byВ total sales. The margin of safetyВ can also be expressed in percentage form. The formula orВ equationВ for theВ calculation of margin of safetyВ is as follows: The higher the margin of safety, the lower the risk of not breaking even. It stats the amount by which sales can drop before losses begin to be incurred. Margin of safety (MOS) is the excess of budgeted or actual sales over the break evenВ volume of sales.

Structural margin of safety