The following is last month's contribution format income statement:
What is the company's margin of safety in dollars?

Question

The following is last month's contribution format income statement: 
What is the company's margin of safety in dollars?

Quizplus · Accepted Answer

Margin of safety is the excess of budgeted (or actual) sales over the break-even point. From the contribution format income statement, we can see that the company's budgeted sales are $2,500,000 and the break-even point is $2,250,000. Therefore, the margin of safety is $2,500,000 - $2,250,000 = $250,000. So, option D is the correct choice.

The Following Is Last Month's Contribution Format Income Statement