00:01
This part of the problem addresses the margin of safety, and it says we want to describe it.
00:06
So we're just going to give a brief description of this, which is basically it's the difference between the expected profit and break -even profit.
00:23
Okay, so you saw from the last part of the question that we calculated, during that time, we calculated the break -even sales units.
00:48
And that was where we decided that that was the break -even sales, the fixed costs, divided by the contribution margin.
01:04
And that was where we had $61 ,600 divided by $140 ,000, and that gave us 440 units.
01:22
Then we also calculated, in that same calculation, we did the break -even sales value.
01:34
And that is where we determined that that would be the break -even units times the selling price per unit, which gave us a total of 440 times the 280, and that resulted in 123 ,200.
02:07
So i'm restating this information here because we need to use this information to get the margin of safety.
02:14
It doesn't say if we're doing it in units or dollars, so we'll just do it in both.
02:19
So first we'll do the margin of safety in dollars...