Ashley thought she understood break-even analysis from Chapter 21 but then she started over-thinking it. Why did those stupid old men accountants a long time ago invent a way for companies to PLAN to break even? It doesnt make sense because in real life companies dont want to break even; they want to make a profit!

One of Ashley's brave classmates tried to offer an explanation but Ashley responded that we should just learn about target profit instead and it would save us all a lot of time. The classmate gave up arguing because Ashley suddenly got a mean look on her face and began angrily balling up her fists.

(1) What is target profit and how does it differ from break-even? Is Ashley on the right track at all or could she possibly benefit from the students correction? Please explain.

(2) Please also discuss margin of safety. How is it calculated and how can that information be useful to managers?