Question

Halifax Products sells a product for $108. Variable costs per unit are $55, and monthly fixed costs are $111,300.

a. What is the break-even point in units?

b. How many units would need to be sold to earn a target profit of $206,700?

c. Assuming they achieve the level of sales required in part b, what is the margin of safety in sales dollars?

Answer 1

	Sales Price	$108
	Variable Cost	$55
	Contribution	$53
	Fixed Cost	$111,300
a	Break-Even Point	111300/53
	Break-Even Point	2100	Units
b	Units required for profit of $206700
	Units		(206700+111300)/53
	Units		6000
c	Sales at 6000 Units		6000*108
	Sales at 6000 Units		$        648,000
	Sales at Break-Even		2100*108
	Sales at Break-Even		$        226,800
	Margin of Safety	Actual Sales - Break-Even Sales
			648000-226800
	Margin of Safety	$        421,200