Use the following information to determine the margin of safety in dollars:
Unit sales ……………………… 50,000 Units
Dollar sales……………………… $500,000
Fixed costs……………………… $204,000
Variable costs ……………………… $187,500

Question

Quizplus · Accepted Answer

Contribution margin ratio = ($500,000 - $187,500)/$500,000 = 62.5%
Break-even sales = $204,000/0.625 = $326,400
Margin of safety in dollars = $500,000 - $326,400 = $173,600

Use the Following Information to Determine the Margin of Safety