Demonstrate what margin of safety is

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Units sold or revenue earned above and beyond the break-even point contributes to the margin of safety for a company. Margin of safety is a crude measure of risk, in that it serves as the padding between profit and the break-even point.

Complete the following:

Problem 1: Expressed in terms of units, if a company hits its break-even point in units (say, 100 units) and actually sells 400 units, then the margin of safety is units. Similarly, if the break-even point in sales revenue is $200,000, and it actually has sales revenue of $400,000, then its margin of safety is $.

Reference no: EM132657358

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