Larry sells each unit for $500. Variable costs per unit equal $300. Totalfixed costs equal $800,000. Larry is currently sellig 5,000 units per period and would like to earn net income of $400,00.

Question

Larry sells each unit for $500. Variable costs per unit equal $300. Totalfixed costs equal $800,000. Larry is currently sellig 5,000 units per period and would like to earn net income of $400,00. 
comput: Break-evn point indollras, sales units necessary to attain desired income, and margin of safety ration for current operations. 
I have break-even point: 4000
Desired sales: 204 
Margin of safety? not sure where to go from here.

bobpursley · Answer

Margin of safety is based on current sales, 5000. break even: n*500-n*300-800,000=0 2OON=800,000 n=4000 net income: 500n-300n-800,000=400,000 200n=1.2Million n= 6000 units to net 400,000