The margin of safety as a percentage of sales is closest to:
A)73%
B)79%
C)21%
D)27%

Question

Quizplus · Accepted Answer

The margin of safety is the difference between the expected sales and the breakeven point, expressed as a percentage of expected sales.

Margin of safety = ((Expected sales - Breakeven sales) / Expected sales) x 100%

From the information provided, we know that the breakeven point is $690,000 and the expected sales are $875,000.

Therefore, the margin of safety is:

((875,000 - 690,000) / 875,000) x 100% = 21.14%

Rounded to the nearest percent, the margin of safety is closest to 21%.

So, the best choice is C) 21%.

The Margin of Safety as a Percentage of Sales Is