Use the Following Information to Determine the Margin of Safety

question 101

Multiple Choice

Use the following information to determine the margin of safety in dollars:
Unit sales ……………………… 50,000 Units
Dollar sales……………………… $500,000
Fixed costs……………………… $204,000
Variable costs ……………………… $187,500

• A)$ 88,500.
• B)$108,500.
• C)$173,600.
• D)$326,400.
• E)$500,000.

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Definitions:

Safe Projects

These are investment ventures with a low risk of failure or loss, often characterized by predictable revenue streams or market demands.

Bankruptcy

A legal process through which individuals or businesses unable to meet their financial obligations can relieve their debts by transferring assets to a trustee.

Target Capital Structure

The optimal mix of debt, equity, and other financing sources that a company aims to achieve to minimize its cost of capital.

After-Tax Cost

The net cost of an investment after the reduction of any taxes that are applicable to it, reflecting the actual cost to the investor.