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What is the margin of safety if the break-even sales are $100,000 and actual sal

Practice Questions

Q1
What is the margin of safety if the break-even sales are $100,000 and actual sales are $150,000?
  1. $50,000
  2. $100,000
  3. $150,000
  4. $200,000

Questions & Step-by-Step Solutions

What is the margin of safety if the break-even sales are $100,000 and actual sales are $150,000?
  • Step 1: Identify the break-even sales amount, which is $100,000.
  • Step 2: Identify the actual sales amount, which is $150,000.
  • Step 3: Use the formula for margin of safety: Margin of safety = Actual Sales - Break-even Sales.
  • Step 4: Substitute the values into the formula: Margin of safety = $150,000 - $100,000.
  • Step 5: Calculate the result: $150,000 - $100,000 = $50,000.
  • Step 6: The margin of safety is $50,000.
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