Company A has break-even sales of 90,000 units and budgeted sales of 99,000 units.What is the margin of safety as expressed as a percentage?
A) 9.00%
B) 10.0%
C) 9.09%
D) None of these answers is correct.

Question

Quizplus · Accepted Answer

Margin of safety is calculated as the difference between the actual or budgeted sales and the break-even sales, divided by the actual or budgeted sales expressed as a percentage.

Margin of safety = ((Budgeted sales - Break-even sales) / Budgeted sales) x 100%

Margin of safety = ((99,000 - 90,000) / 99,000) x 100%

Margin of safety = (9,000 / 99,000) x 100%

Margin of safety = 9.09%

Therefore, the answer is C, 9.09%.

Company a Has Break-Even Sales of 90,000 Units and Budgeted