A break-even chart for Product X shows expected unit sales of 5 000 at $1 000 each, maximum profit of $200 000, a break-even point of 2 143 units and a loss of $150 000 if no units are sold. What is the margin of safety? a. 7 143 units b. 2 857 units c. 2 143 unitsd. 5 000 units
Question
A break-even chart for Product X shows expected unit sales of 5 000 at 200 000, a break-even point of 2 143 units and a loss of $150 000 if no units are sold. What is the margin of safety? a. 7 143 units b. 2 857 units c. 2 143 unitsd. 5 000 units
Solution
The margin of safety is calculated as the difference between the expected level of sales and the break-even level of sales. In this case, the expected level of sales is 5,000 units and the break-even point is 2,143 units.
So, the margin of safety = Expected level of sales - Break-even point = 5,000 units - 2,143 units = 2,857 units
Therefore, the margin of safety is 2,857 units. So, the correct answer is b. 2,857 units.
Similar Questions
Our company sells its product for $100 per unit and has a variable cost of $40 per unit. Total fixed costs equal $18,000. The breakeven in units is 300, and we expect to sell 350 units. What is the margin of safety in dollars?Group of answer choices($5,000)$3,000($3,000)$5,000
Marshall Company had actual sales of $600,000 when break-even sales were $420,000. What is the margin of safety ratio?a.25%.b.30%.c.33.33%d.45%Clear my choice
Assume a fixed cost of $900, a variable costof $4.50 per unit and a selling price of $5.50per unit.– A) What is the break-even point?– B) How many units must be sold to make a profitof $500.– C) How many units must be sold to average $0.25profit per unit? $0.50 profit per unit? $1.50 profitper unit
Break - even point occurs at 40% of` total capacity, margin of safety will be .a.40% .b.60% .c.85% .d.80% .
Actual sales Rs .4,00,000; Break-even sales Rs. 2,50,000; Margin of Safety in percentage is _.a.33.33%.b.76.33%.c.37.5% .d.66.67%
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.