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 the procedure is performed 200 times?

Question

Quizplus · Accepted Answer

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

First, we need to calculate the break-even point:

Fixed costs / (Price per unit - Variable costs per unit) = Break-even point
$8,000 / ($400 - $200) = 40 procedures

Next, we can calculate the actual sales:

Actual sales = 200 procedures x $400 per procedure = $80,000

Margin of safety = Actual sales - Break-even sales 
Margin of safety = $80,000 - ($400 x 40 procedures) 
Margin of safety = $80,000 - $16,000 
Margin of safety = $64,000

Therefore, the margin of safety assuming the procedure is performed 200 times is $64,000. Option B is the correct answer.

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