If a business had sales of $4,000,000 and a margin of safety of 25%, the break-even point was
A) $5,000,000
B) $3,000,000
C) $12,000,000
D) $1,000,000

Question

Quizplus · Accepted Answer

Margin of safety is the amount of sales above the break-even point. If the margin of safety is 25%, it means that sales are 125% of the break-even sales. So, the break-even sales are $4,000,000/1.25 = $3,200,000. Therefore, the break-even point is $3,200,000, which is closest to option B, $3,000,000.

If a Business Had Sales of $4,000,000 and a Margin