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19 July, 19:14

If the margin of safety for canace company was 20%, fixed costs were $1,875,000, and variable costs were 80% of sales, what was the amount of actual sales (dollars) ? (hint: de - termine the break-even in sales dollars f

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  1. 19 July, 22:37
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    Calculation of amount of actual sales (dollars):

    Step-1: Calculation of break-even in sales dollars:

    Break-even in sales dollars = Fixed costs / (100% - Variable Cost %)

    Break-even in sales dollars = 1875000 / (100%-80%)

    Break-even in sales dollars = 1875000 / 20%

    Break-even in sales dollars = $9,375,000

    Step-2: Calculation of actual sales:

    Actual Sales = Break-even in sales dollars / (100% - Margin of safety %)

    Actual Sales = 9375000 / (100%-20%)

    Actual Sales = 9375000 / 80%

    Actual Sales = $11,718,750

    Hence, the Amount of actual sales (dollars) is $11,718,750
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