Jarvis Foods produces a gourmet condiment which sells for $10.00 per unit. Variable costs are $7.50 per unit, and fixed costs are $18,000 per month. Jarvis is currently selling 8,000 units per month. How much is Jarvis's margin of safety expressed in sales revenue?

Question

Quizplus · Accepted Answer

A) Calculations:
$10.00 - $7.50 = $2.50
$18,000/$2.50 = 7,200
7,200 × $10.00 = $72,000
8.000 × $10.00 = $80,000
$80,000 - $72,000 = $8,000

Jarvis Foods Produces a Gourmet Condiment Which Sells for $10