Golebiewski Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. The margin of safety percentage is closest to:

Question

Golebiewski Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range.  The margin of safety percentage is closest to:

Quizplus · Accepted Answer

CM ratio = Contribution margin ÷ Sales = $37,500 ÷ $150,000 = 25%
Dollar sales to break even = Fixed expenses ÷ CM ratio = $35,250 ÷ 25% = $141,000
Margin of safety in dollars = Total budgeted (or actual) sales − Break-even sales
= $150,000 − $141,000 = $9,000
Margin of safety percentage = Margin of safety in dollars ÷ Total budgeted (or actual) sales
= $9,000 ÷ $150,000 = 6%

Golebiewski Corporation Has Provided the Following Contribution Format Income Statement