Erin Shelton, Inc., wants to earn a target profit of $800,000 this year. The company’s fixed costs are expected to be $1,000,000 and its variable costs are expected to be 60 percent of sales. Erin Shelton, Inc., earned $700,000 in profit last year.
1. Calculate the break even sales.
2. Calculate target sales to meet profit of 800,000.
3. When the company earns $800,000 of net income, what is its margin of safety and margin of safety as a percentage of sales?