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March 28, 2017

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Larry sells each unit for $500. Variable costs per unit equal $300. Totalfixed costs equal $800,000. Larry is currently sellig 5,000 units per period and would like to earn net income of $400,00.
comput: Break-evn point indollras, sales units necessary to attain desired income, and margin of safety ration for current operations.
I have break-even point: 4000
Desired sales: 204
Margin of safety? not sure where to go from here.

  • Accounting - ,

    Margin of safety is based on current sales, 5000.

    break even: n*500-n*300-800,000=0
    2OON=800,000
    n=4000
    net income: 500n-300n-800,000=400,000
    200n=1.2Million
    n= 6000 units to net 400,000

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