Question

has a margin of safety percentage of 20% based on its actual sales. The break-even point is $759000 and the variable expenses are 60% of sales. Q: Given this information, the actual profit is:

Answer 1

Answer:  $379,500

Explanation:

Total Sales = Break-even sales + Margin of Safety

The Break-Even sales are therefore = 100% - 20%

= 80% of sales

Total Sales is therefore;

Break-even =   80% * Total Sales

Total Sales = Break-even/80%

= 759,000/0.8

= $948,750

Assuming no fixed costs, actual profit will be Sales less Variable expenses;

=Sales - Variable expenses  

= 1 - 60%

Actual profit = 40% * Sales

= 40% * 948,750

= $379,500