If a company has a margin of safety of $10,000 and its break-even sales are $50,000, what are its actual sales?
Practice Questions
1 question
Q1
If a company has a margin of safety of $10,000 and its break-even sales are $50,000, what are its actual sales?
$40,000
$60,000
$50,000
$70,000
Actual sales = Break-even sales + Margin of safety = $50,000 + $10,000 = $60,000.
Questions & Step-by-step Solutions
1 item
Q
Q: If a company has a margin of safety of $10,000 and its break-even sales are $50,000, what are its actual sales?
Solution: Actual sales = Break-even sales + Margin of safety = $50,000 + $10,000 = $60,000.
Steps: 6
Step 1: Understand what break-even sales mean. Break-even sales is the amount of money a company needs to make to cover all its costs, which is $50,000 in this case.
Step 2: Understand what margin of safety means. Margin of safety is the amount by which actual sales exceed break-even sales, which is $10,000 here.
Step 3: To find actual sales, you need to add the break-even sales to the margin of safety.
Step 4: Perform the calculation: Actual sales = Break-even sales + Margin of safety = $50,000 + $10,000.
Step 5: Calculate the total: $50,000 + $10,000 = $60,000.
Step 6: Conclude that the actual sales are $60,000.
