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Break-Even Point Analysis

Margin of Safety

PRACTICE QUESTION

Achieving break-even is fine as an initial or interim goal, but most businesses and entrepreneurs would prefer to have a margin of safety. Let's assume your start a pie-making business as a side hustle, generating $21,000 in revenue and incurring of $6,300 in variable costs and $6,000 in fixed costs. What is your margin of safety?

  1. $21,000
  2. $14,700
  3. $15,000
  4. $8,700