The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. If Burkett Corporation is able to achieve the budgeted level of sales, its margin of safety in dollars would be:

Question

Quizplus · Accepted Answer

Margin of safety in dollars is calculated by subtracting expected sales from the break-even point. The break-even point for Burkett Corporation is $750,000 ($300,000 fixed costs divided by 0.4 contribution margin ratio). The expected sales are $1,125,000. Therefore, the margin of safety in dollars would be:
$1,125,000 - $750,000 = $375,000. 
Therefore, the closest option is D, $275,862.

The Budgeted Income Statement Presented Below Is for Burkett Corporation