Use the following information to answer the following Questions
Narchie sells a single product for $50. Variable costs are 60% of the selling price, and the company has fixed costs that amount to $400,000. Current sales total 16,000 units.
-If Narchie sells 24,000 units, its safety margin will be:
A) $200,000.
B) $400,000.
C) $1,000,000.
D) $1,200,000.
E) None of the answers is correct.

Question

Quizplus · Accepted Answer

The safety margin is calculated as the difference between actual sales and break-even sales. First, calculate the break-even point: Fixed Costs / (Selling Price - Variable Cost per Unit) = $400,000 / ($50 - $30) = 20,000 units. At 24,000 units, sales are $1,200,000. Break-even sales are 20,000 units * $50 = $1,000,000. The safety margin is $1,200,000 - $1,000,000 = $200,000.

Use the Following Information to Answer the Following Questions