Answer:
Instructions are below.
Explanation:
Giving the following information:
Annual fixed costs are $150,000, and variable costs are 40 percent of sales revenue. Last year's revenues totaled $300,000.
<u>To calculate the break-even point in dollars, we need to use the following formula:</u>
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 150,000 / [(300,000*0.6)/300,000]
Break-even point (dollars)= $250,000
<u>Now, we can determine the margin of safety:</u>
<u></u>
Margin of safety= (current sales level - break-even point)
Margin of safety= 300,000 - 250,000= $50,000
<u>Finally, the sales dollar required to reach $80,000 profit:</u>
Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio
Break-even point (dollars)= (150,000 + 80,000) / 0.6
Break-even point (dollars)= $383,333.33
