Explore BrainMass
Share

Explore BrainMass

    Break-Even Point and Margin of Safety

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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.

    © BrainMass Inc. brainmass.com October 9, 2019, 9:57 pm ad1c9bdddf
    https://brainmass.com/business/finance/break-even-point-margin-safety-203235

    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.

    $2.19