Eastwick Produces and Sells Three Products -
Fixed Costs Total $200,000

question 4

Multiple Choice

Eastwick produces and sells three products. Last month's results are as follows:
$\begin{array}{llr} &\text { P1 } &\text { P2 } &\text { P3 } \\ \text { Revenues } &\$100,000&\$200,000&\$200,000\\ \text {Variable costs } &40,000&140,000&80,000\end{array}$

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Fixed costs total $200,000. What is Eastwick's margin of safety? (Assume the current product mix.)

• A) $83,333.
• B) $40,000.
• C) $460,000.
• D) $115,385.

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Definitions:

Accounts

Financial records of an entity that detail transactions and can be used to prepare financial statements.

Loss Carry-Forward

A tax provision allowing companies to use their current year's net operating losses to reduce taxable income in future years.

Capital Losses

Financial losses incurred when the selling price of an asset is less than the purchase price.

Capital Gains

The profit from the sale of an asset or investment when the selling price exceeds its purchase price.