Question

James Company has a margin of safey percentage of 20% based on its actual sales. The break-even point is $200,000 and the variable expenses are 45% of sales. Given this information, The actual profit is? (please show work).

Answer 1

actual sales=break-even point+margin of safety

Breakeven point=(1-0.2)=0.8Sales

Hence total sales=(200,000/0.8)=$250,000

Hence Margin of safety=(250,000-200,000)=$50000

At breakeven contribution margin=Fixed cost

contribution margin=Sales-Variable expenses

(100-45%)=55% of sales

=(200000*0.55)=$110,000=Fixed expenses

Sales	250000
Less:Variable expenses(250000*45%)	(112500)
contribution margin	$137500
Less:Fixed expenses	(110000)
Actual profit	$27500