Answer:
195,000= fixed costs
Explanation:
Giving the following information:
Sales $400,000
Margin of safety $ 100,000
Contribution margin ratio of 65%
To calculate the fixed costs, we need to use the break-even point in dollars formula:
Break-even point (dollars)= fixed costs/ contribution margin ratio
300,000= fixed costs/ 0.65
195,000= fixed costs
Answer:
C. $195,000
Explanation:
Fixed expenses are those expenses which remains fix and do not vary with change in activity level. Most of these costs are period cost like, salary, rent etc.
At break-even the the business covers all the costs the variable and fixed costs as well.
Margin of safety is the level of sales over the break-even point.
Break-Even Point = Sales - Margin of safety = $400,000 - $100.000 = $300,000
Break even = Fixed cost / Contribution margin ratio
$300,000 = Fixed cost / 65%
Fixed Cost = $300,000 x 65% = $195,000
