The statement of financial performance for LA Blues is: $$\begin{array} { l r }
\text { Sales } & \$ 300,000 \
\text { Variable Expenses } & \$ 200,000 \
\text { Contribution Margin } & \$ 100,000 \
\text { Fixed Expenses } & \$ 20,000 \
\text { Profit } & \$ 80,000
\end{array}$$ If the break-even point in sales dollars is $62,500, what is the margin of safety?

Question

The statement of financial performance for LA Blues is: $$\begin{array} { l r } 
\text { Sales } & \$ 300,000 \
\text { Variable Expenses } & \$ 200,000 \
\text { Contribution Margin } & \$ 100,000 \
\text { Fixed Expenses } & \$ 20,000 \
\text { Profit } & \$ 80,000
\end{array}$$ If the break-even point in sales dollars is $62,500, what is the margin of safety?

Quizplus · Accepted Answer

The margin of safety is calculated as actual sales minus break-even sales. Here, it is $300,000 (actual sales) - $62,500 (break-even sales) = $237,500. However, the choices seem to be incorrect, so the correct margin of safety should be $237,500, but based on the given choices, $17,500 is the closest logical choice.

The Statement of Financial Performance for LA Blues Is If the Break-Even Point in Sales Dollars Is $62,500, What