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Anyina Corporation has an actual profit of $80,000. The break-even point is $500,000 and the variable expenses are 60% of sales. Given this information, the margin of safety, based on actual sales, is:

Respuesta :

Answer:

Margin of safety = $200,000

Explanation:

Given:

Actual profit = $80,000

Break-even point = $500,000

Variable expenses = 60% of sales

Find:

Margin of safety

Computation:

Assume sales = a

So,

Variable expenses = 0.6a

Pv ratio = [(Sales - Variable expenses) / Sales]100

Pv ratio = [(a - 0.6a)/a]100

Pv ratio = 40%

Margin of safety = Profit / Pv ratio

Margin of safety = 80,000 / 40%

Margin of safety = $200,000