James Company has a margin of safety percentage of 20%.The break-even point is $200,000 and the variable costs are 45% of sales.Given this information,the operating profit is:

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Quizplus · Accepted Answer

The margin of safety is the difference between actual sales and break-even sales, expressed as a percentage of actual sales. In this case, the margin of safety is 20%, so actual sales are 120% of break-even sales. The break-even point is $200,000, so actual sales are $240,000. Variable costs are 45% of sales, so variable costs are $108,000. Operating profit is the difference between sales and variable costs, so operating profit is $132,000.

James Company Has a Margin of Safety Percentage of 20