If a business had a capacity of $10,000,000 of sales,actual sales of $6,000,000,break-even sales of $4,500,000,fixed costs of $1,800,000,and variable costs of 60% of sales,what is the margin of safety expressed as a percentage of sales?

Question

Quizplus · Accepted Answer

The margin of safety is calculated as (Actual Sales - Break-even Sales) / Actual Sales. Here, it is ($6,000,000 - $4,500,000) / $6,000,000 = $1,500,000 / $6,000,000 = 0.25 or 25%.

If a Business Had a Capacity of $10,000,000 of Sales,actual