If a company has a margin of safety of $20,000 and its total sales are $100,000, what is the break-even sales?
Practice Questions
1 question
Q1
If a company has a margin of safety of $20,000 and its total sales are $100,000, what is the break-even sales?
$80,000
$60,000
$40,000
$20,000
Break-even sales = Total sales - Margin of safety = $100,000 - $20,000 = $80,000
Questions & Step-by-step Solutions
1 item
Q
Q: If a company has a margin of safety of $20,000 and its total sales are $100,000, what is the break-even sales?
Solution: Break-even sales = Total sales - Margin of safety = $100,000 - $20,000 = $80,000
Steps: 6
Step 1: Understand what margin of safety means. It is the amount by which sales can drop before the company reaches its break-even point.
Step 2: Identify the total sales amount, which is given as $100,000.
Step 3: Identify the margin of safety, which is given as $20,000.
Step 4: To find the break-even sales, subtract the margin of safety from the total sales. This means you do the calculation: $100,000 (total sales) - $20,000 (margin of safety).
Step 5: Perform the subtraction: $100,000 - $20,000 = $80,000.
Step 6: The result, $80,000, is the break-even sales amount.
