If the selling price per unit is $100 and the variable cost per unit is $60, what is the margin of safety in dollars if the break-even sales are $40,000?
Practice Questions
1 question
Q1
If the selling price per unit is $100 and the variable cost per unit is $60, what is the margin of safety in dollars if the break-even sales are $40,000?
$20,000
$30,000
$10,000
$15,000
Margin of safety = Actual sales - Break-even sales. Actual sales = Selling price per unit * Number of units sold. If 1,000 units are sold, Actual sales = $100 * 1,000 = $100,000. Margin of safety = $100,000 - $40,000 = $60,000.
Questions & Step-by-step Solutions
1 item
Q
Q: If the selling price per unit is $100 and the variable cost per unit is $60, what is the margin of safety in dollars if the break-even sales are $40,000?
Solution: Margin of safety = Actual sales - Break-even sales. Actual sales = Selling price per unit * Number of units sold. If 1,000 units are sold, Actual sales = $100 * 1,000 = $100,000. Margin of safety = $100,000 - $40,000 = $60,000.
Steps: 5
Step 1: Identify the selling price per unit, which is $100.
Step 2: Identify the break-even sales, which is $40,000.
Step 3: Determine the number of units sold. For this example, we will assume 1,000 units are sold.
Step 4: Calculate the actual sales by multiplying the selling price per unit by the number of units sold: $100 * 1,000 = $100,000.
Step 5: Calculate the margin of safety by subtracting the break-even sales from the actual sales: $100,000 - $40,000 = $60,000.
