Arthur corporation has a margin of safety percentage of 25% based on its actual sales. the break-even point is $300,000 and the

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EastWind [94]

4 years ago

10

Arthur corporation has a margin of safety percentage of 25% based on its actual sales. the break-even point is $300,000 and the

variable expenses are 45% of sales. given this information, the actual profit is:

Business

1 answer:

Phantasy [73] · Answer 1 · 2022-01-09T00:33:29+03:00

Actual Profit (P) is equal to Actual Sales (S) minus Total Expenses (E). Given that the Margin of Safety percentage (M) of Total Sales is 25%, we can establish an equation relating the Total Sales, Break-even point and M. It would be S - $300,000 = 0.25S, since Margin of Safety is equal to Total Sales minus Break-even point. Solving for S would result to $400,000. Given that E is equal to 45% of S, E would then be equal to $180,000. Solving for P, P = $400,000 - $180,000. Therefore, P is equal to $220,000.