During the current year, OutlyTech Corp. expected to sell 24,000 telephone switches. Fixed costs for the year were expected to be $12,144,000, the unit sales price was budgeted at $3,200, and unit variable costs were budgeted at $1,440.
OutlyTech's margin of safety ratio (MOS %) is:

Question

Quizplus · Accepted Answer

The margin of safety ratio is calculated as (Actual Sales - Break-even Sales) / Actual Sales. Break-even Sales = Fixed Costs / (Sales Price per Unit - Variable Cost per Unit) = $12,144,000 / ($3,200 - $1,440) = 7,500 units. Margin of Safety in units = 24,000 - 7,500 = 16,500 units. MOS % = (16,500 / 24,000) * 100 = 71.25%.

During the Current Year, OutlyTech Corp