Use the information below to answer the following question(s).Dr.Mickey Finn performs a certain procedure for $400.00.The fixed costs are $8,000 and variable costs are $200.00 per procedure.
-What is the margin of safety assuming 100 procedures are performed?
A)$16,000 or 40 times
B)$20,000 or 50 times
C)$24,000 or 60 times
D)$40,000 or 100 times
E)$50,000 or 110 times

Question

Quizplus · Accepted Answer

The margin of safety is the difference between the actual sales and the break-even point.

First, we need to calculate the break-even point:
Break-even point = Fixed costs / Contribution margin per unit
Contribution margin per unit = Price per unit - Variable costs per unit
Contribution margin per unit = $400 - $200 = $200
Break-even point = $8,000 / $200 = 40 units

Since the price per unit is $400, we can calculate the sales revenue with the formula:
Sales revenue = Price per unit x Number of units
Sales revenue = $400 x 100 = $40,000

To calculate the margin of safety, we need to subtract the break-even point from the actual sales:
Margin of safety = Actual sales - Break-even point
Margin of safety = $40,000 - ($400 x 40) = $24,000 or 60 times

Therefore, the answer is (C) $24,000 or 60 times.

Use the Information Below to Answer the Following Question(s)