Use the Following Information to Determine the Margin of Safety

question 165

Multiple Choice

Use the following information to determine the margin of safety in dollars:
$\begin{array}{ll}\text { Unit sales }&50,000 \text { unit }\\ \text { Dollar sales } & \$ 500,000 \\\text { Fixed costs } & \$ 204,000 \\\text { Variable costs } & \$ 187,500\end{array}$

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

---

Definitions:

Maximum Profit

The highest possible financial gain achievable by a firm from its operations, after all costs have been subtracted from total revenue.

Output

The quantity of goods or services produced within a given time frame by a firm, industry, or country.

Long-Run Supply

The time period in which all factors of production and costs are variable, allowing firms to fully adjust to market conditions.

Curve

In economics, this refers to a graphical representation depicting the relationship between two variables, such as supply and demand.