Baldwin's Bagel Shop had the following activity for December: Total bagels sold 17,000
Total revenues $595,000
Total fixed costs 99,000
Total variable costs 357,000
What was Baldwin's margin of safety, in dollars?
A) $430,000
B) $247,500
C) $347,500
D) $357,000

Question

Quizplus · Accepted Answer

The margin of safety is calculated as Total Revenues minus Break-even Sales. Break-even Sales = Fixed Costs / (1 - (Variable Costs / Total Revenues)). Here, Break-even Sales = $99,000 / (1 - ($357,000 / $595,000)) = $247,500. Therefore, Margin of Safety = $595,000 - $247,500 = $347,500.

Baldwin's Bagel Shop Had the Following Activity for December: Total