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# Break-Even Point and Margin of Safety

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Embleton Company estimates that variable costs will be 40% of sales, and fixed costs will total \$900, 000. The selling price of the product is \$5.

a. Compute the break-even point in (1) units and (2) dollars.
b. Computer the margin of safety in (1) dollars and (2) as a ratio, assuming actual sales are \$2 million.

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#### Solution Preview

a. Compute the break-even point in (1) units and (2) dollars.1

(2) In dollars the breakeven point = Fixed cost/Contribution margin ratio
Since the variable cost is 40% of sales, the ...

#### Solution Summary

The solution explains the calculation of break-even point and margin of safety. The margin of safety in dollars and as a ratio are determined.

\$2.49