A product has a selling price of $80 and a variable cost of $50. What is the mar

A product has a selling price of $80 and a variable cost of $50. What is the margin of safety if the break-even sales are $200,000?

A product has a selling price of $80 and a variable cost of $50. What is the margin of safety if the break-even sales are $200,000?

Step 1: Identify the selling price of the product, which is $80.
Step 2: Identify the break-even sales, which is $200,000.
Step 3: Assume a number of units sold. For this example, we will assume 4,000 units.
Step 4: Calculate the actual sales by multiplying the selling price by the number of units sold: $80 * 4,000 = $320,000.
Step 5: Calculate the margin of safety by subtracting the break-even sales from the actual sales: $320,000 - $200,000 = $120,000.

Margin of Safety – The difference between actual sales and break-even sales, indicating how much sales can drop before a loss occurs.
Break-even Analysis – Determining the sales level at which total revenues equal total costs, resulting in neither profit nor loss.
Variable Costs – Costs that change in proportion to the level of sales or production.
Selling Price – The price at which a product is sold to customers.