Asked by Christopher Roney on May 27, 2024
Verified
Proctor Company has fixed costs of $315,000 and a contribution margin ratio of 24%.If sales are expected to be $1,500,000,what is the margin of safety,in percent?
Contribution Margin Ratio
The percentage of each sale that contributes to covering fixed costs, calculated as (Sales - Variable Costs) / Sales.
Margin of Safety
The difference between actual sales and the break-even point, measuring the risk of not covering fixed costs.
- Calculate the margin of safety and its implications for business stability.
Verified Answer
KC
Kayla CallaghanMay 27, 2024
Final Answer :
Break-even point in dollars sales = $315,000/0.24 = $1,312,500
Margin of safety in percent = ($1,500,000 - $1,312,500)/$1,500,000 = 12.5%
Margin of safety in percent = ($1,500,000 - $1,312,500)/$1,500,000 = 12.5%
Learning Objectives
- Calculate the margin of safety and its implications for business stability.