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.

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

To calculate the break-even point in dollars, you need to determine the total revenue required to cover your fixed and variable costs. The formula to calculate the break-even point is:

Break-even point (in units) = Fixed costs / (Selling price per unit - Variable cost per unit)

In this case, the fixed costs are $800,000, the selling price per unit is $500, and the variable cost per unit is $300.

Break-even point (in units) = $800,000 / ($500 - $300)
Break-even point (in units) = $800,000 / $200
Break-even point (in units) = 4,000 units

To calculate the break-even point in dollars, you can multiply the break-even point in units by the selling price per unit:

Break-even point (in dollars) = Break-even point (in units) * Selling price per unit
Break-even point (in dollars) = 4,000 units * $500
Break-even point (in dollars) = $2,000,000

So, the break-even point in dollars is $2,000,000.

Next, let's calculate the sales units necessary to attain the desired income of $400,000. To do this, you need to consider both the fixed costs and desired income.

Sales units necessary = (Fixed costs + Desired income) / (Selling price per unit - Variable cost per unit)

Sales units necessary = ($800,000 + $400,000) / ($500 - $300)
Sales units necessary = $1,200,000 / $200
Sales units necessary = 6,000 units

To calculate the margin of safety ratio for current operations, you need to subtract the break-even point units from the actual sales units and divide by the actual sales units.

Margin of safety ratio = (Sales units - Break-even point) / Sales units

Margin of safety ratio = (5,000 units - 4,000 units) / 5,000 units
Margin of safety ratio = 1,000 units / 5,000 units
Margin of safety ratio = 0.20 or 20%

Therefore, the margin of safety ratio for current operations is 20%.