The following is last month's contribution format income statement: What is the company's margin of safety percentage to the nearest whole percent?

Question

The following is last month's contribution format income statement:  What is the company's margin of safety percentage to the nearest whole percent?

Quizplus · Accepted Answer

CM ratio = Contribution margin F1F1F1S1F1F1F10 Sales
= $500,000 F1F1F1S1F1F1F10 $1,200,000 = 5/12
Dollar sales to break even = Fixed expenses F1F1F1S1F1F1F10 CM ratio
= $300,000 F1F1F1S1F1F1F10 5/12 = $720,000
Margin of safety in dollars = Total actual sales - Break-even sales
= $1,200,000 - $720,000 = $480,000
Margin of safety percentage = Margin of safety in dollars F1F1F1S1F1F1F10 Total actual sales
= $480,000 F1F1F1S1F1F1F10 $1,200,000 = 0.40

The Following Is Last Month's Contribution Format Income Statement