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Hello students, here is a question.
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Bartik's company has a sales revenue of $800 ,000 in a month of june 2016.
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The variable cost for the month are $600 ,000.
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Are the total cost are $776 ,000.
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What is the margin of safety ratio of a company for the month of june 2016? we have four options given here.
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Option a is 1196 .12 and option c is 15a.
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Option d is 1000.
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So, we have to choose the right options from this.
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So, let us start solving this problem.
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First, we need to find the contribution margin, which is the difference between sales revenue and variable cost.
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So, the values are $800 ,000 minus $600 ,000, which gives us contribution margin of $200 ,000.
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So, next we need to find out a fixed cost, which is the difference between total cost and variable cost.
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So, fixed cost is equal to total cost minus variable cost.
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The values are $776 ,000 minus $600 ,000, which gives us $176 ,000.
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Now, we can find the break -even point, which is the point where the total equal sales revenue.
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We can calculate by dividing a fixed cost by contribution margin ratio...