To calculate the fixed costs, let's break the problem into logical steps:

Given:

1. Sales = P500,000
2. Contribution Margin Ratio (CMR) = 20%
3. Margin of Safety Ratio (MOSR) = 25%

Formula for Margin of Safety (MOS):

$\text{MOS} = \text{Actual Sales} - \text{Break-Even Sales}$ or equivalently, $\text{MOSR} = \frac{\text{MOS}}{\text{Actual Sales}}$

From the MOSR, we can find the Break-Even Sales: $\text{Break-Even Sales} = \text{Actual Sales} \times (1 - \text{MOSR})$

$\text{Break-Even Sales} = P500,000 \times (1 - 0.25) = P500,000 \times 0.75 = P375,000$

Formula for Contribution Margin:

$\text{CM} = \text{Sales} \times \text{CMR}$

$\text{CM} = P500,000 \times 0.20 = P100,000$

At Break-Even:

$\text{CM at Break-Even Sales} = \text{Fixed Costs}$

Since Contribution Margin = Fixed Costs at Break-Even: $\text{Fixed Costs} = P100,000$

Answer:

The company’s fixed costs are P100,000.

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Would you like further clarification or help with similar problems? Here are 5 related questions to expand your understanding:

1. How is the margin of safety ratio calculated, and why is it important?
2. If the contribution margin ratio increases, how does it affect the break-even point?
3. What would happen to the fixed costs if the margin of safety ratio were reduced to 10%?
4. How can the contribution margin ratio be improved in a business?
5. How do variable costs impact the break-even point?

Tip:

Always double-check the relationship between sales, contribution margin, and fixed costs to ensure consistency in your calculations!