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

Quizplus · Accepted Answer

To calculate the margin of safety in dollars, we need to find the difference between actual or expected sales and the break-even sales.

First, we will calculate the break-even sales using the contribution margin ratio:

Contribution margin ratio = (Total sales - Total variable expenses)/total sales
30% = (BE sales - $90,000)/BE sales
BE sales = $128,571.43

Now, we can calculate the margin of safety in dollars:

Margin of safety = Total actual or expected sales - Break-even sales
Margin of safety = $180,000 - $128,571.43
Margin of safety = $51,428.57

Therefore, the closest option to the margin of safety is $9,000 (Option B).

Golebiewski Corporation Has Provided the Following Contribution Format Income Statement