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Carneys current income statement shows the following: $500,000 Sales revenue Cost of goods sold Variable costs Fixed costs G
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Answer #1

C. $100,000

Contribution margin = Sales revenue - Variable costs = $500,000 - $150,000 - $100,000 = $250,000

Contribution margin ratio = Contribution margin / Sales revenue = $250,000 / $500,000 = 0.50 or 50%

Break-even sales = Fixed costs / Contribution margin ratio = ($150,000 + $50,000) / 0.50 = $400,000

Margin of safety = Actual sales - Break-even sales

Margin of safety = $500,000 - $400,000

Margin of safety = $100,000

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