Choice "C" is correct. Margin of safety equals actual (or budgeted) sales less breakeven sales. Since the margin of safety is $80,000 and sales are $200,000, breakeven sales must be $120,000 ($200,000 − $80,000).

At breakeven, fixed cost equals contribution margin, or $24,000.Choice "b" is incorrect. Margin of safety equals actual sales less breakeven sales. $16,000 is the profit when sales are $200,000. The question asks for fixed cost.Choice "a" is incorrect. Contribution margin is $40,000 at a sales level of $200,000, but with breakeven sales of $120,000, the contribution margin changes. Breakeven sales are actual sales less margin of safety.Choice "d" is incorrect. With a contribution margin of $40,000 ($200,000 ? 20%) at a sales level of $200,000, the fixed cost must be less than $96,000 since the margin of safety ($80,000) equals actual sales less breakeven sales.