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Assume a company sells a single product. If Q equals the level of output, p is the selling price per unit, v is the variable expense per unit, and F is the fixed expense, then the safety margin in dollars is: Ans:

a. F/[Q(p-v)].
b. Q*p - F/[Q(p-v)].
c. Q*p - F/[(p-v)/p].
d. F/[(p-v)/p].

Respuesta :

TomShelby

Answer:

c. Q*p - F/[(p-v)/p].

Explanation:

The safety margin represent the difference between the current level of sales and the break even point.

The current sales will be Q x p

While break even is as follow:

[tex]\frac{Fixed\:Cost}{Contribution \:Margin \:Ratio} = Break\: Even\: Point_{dollars}[/tex]

Where:

[tex]Sales \: Revenue - Variable \: Cost = Contribution \: Margin[/tex]

[tex]\frac{Contribution \: Margin}{Sales \: Revenue} = Contribution \: Margin \: Ratio[/tex]

Thus will be:

[tex]\frac{Fixed\:Cost}{\frac{Sales \: Revenue - Variable \: Cost}{Sales \: Revenue}} = Break\: Even\: Point_{dollars}[/tex]

Making fit the third formula proposition for the second term.

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