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EB15.
LO 3.5Best Wholesale recently calculated their break-even point for their Midwest operations. The national sales manager has asked them to include a $10,500 margin of safety in their calculations. Using the following information, recalculate Best Wholesale’s break-even point in units and dollars with the $10,500 margin of safety included.

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Answer:

(As sales data is not given lets assume that total sales amounts to $50,000 and per unit sale price is $100)

The break even in dollars and units is $ 39,500 and 395 units respectively.

Explanation:

Margin of safety is how much output or sales level can fall before a business reaches its break-even point. This question requires us to tell Best Wholesale’s break-even point in units and dollars with the $10,500 margin of safety. So we will use following equation to calculate break even.

MOS = Actual sales - BE

10,500 = 50,000 -BE

BE in dollars = $ 39,500

BE in units = 39,500/100 = 395 units

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