Break - even point occurs at 40% of` total capacity, margin of safety will be .a.40% .b.60% .c.85% .d.80% .
Question
Break - even point occurs at 40% of` total capacity, margin of safety will be .a.40% .b.60% .c.85% .d.80% .
Solution
The break-even point is the point at which total revenue equals total costs, meaning there is no profit or loss. In this case, it is given that the break-even point occurs at 40% of total capacity.
The margin of safety is the difference between the actual or expected sales and the sales at the break-even point. It is usually expressed as a percentage of actual or expected sales.
If the break-even point is at 40% of total capacity, this means that 60% of total capacity is the margin of safety. This is because the company has to reach 40% of total capacity to cover all costs, and anything above that contributes to profit.
So, the margin of safety is 60% (option b).
Similar Questions
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
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
What does the break-even point represent?a.The target market shareb.The minimum sales volume needed to cover costsc.The total market potentiald.The point of maximum profit
Which of the following statements are correct to describe the Break Even Point Analysis?1) If the Break Even Point is expressed in terms of production capacity rate (%), a larger Break Even Point implies a lower project risk.2) The Break Even Point should be calculated based on the normal year after the project commissioning, instead of the average value within the period.3) The relationship between the Break Even Point expressed in terms of production capacity rate (BEP(%)) and the Break Even Point expressed in terms of quantity (BEP(Q)) is: BEP(Q)=BEP(%) × Design Production Capacity4) Break-even point analysis is suitable for financial evaluation onlyQuestion 10Select one:a.1,2,3b.2,3,4c.1,2,3,4d.3,2,1
What is the break-even point?
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.