Maruca Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range.

-The margin of safety in dollars is closest to:

Question

Maruca Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range.
 
-The margin of safety in dollars is closest to:

Quizplus · Accepted Answer

CM ratio = Contribution margin ÷ Sales = $94,500 ÷ $270,000 = 35%
Dollar sales to break even = Fixed expenses ÷ CM ratio = $86,100 ÷ 35% = $246,000
Margin of safety in dollars = Total budgeted (or actual) sales - Break-even sales
= $270,000 − $246,000 = $24,000

Maruca Corporation Has Provided the Following Contribution Format Income Statement