Asked by Samantha Townsend on Jul 22, 2024
Verified
What is the margin of safety in dollars?
A) $4,505,760
B) $858,240
C) $3,576,000
D) $5,364,000
Margin of Safety
This metric indicates the difference between actual or projected sales and the break-even sales point, highlighting the buffer a business has before it incurs a loss.
- Acquire knowledge on the calculation and analysis of the margin of safety, expressed both in dollars and as a percentage relative to sales.
Verified Answer
GH
gabriel hernandezJul 27, 2024
Final Answer :
B
Explanation :
The margin of safety is calculated by subtracting the break-even point from the actual or projected sales. In this case, the break-even point is $9,164,160 and the actual sales are $10,022,400. Therefore, the margin of safety is $858,240 (10,022,400 - 9,164,160). This means that the company's sales can decrease by $858,240 before it starts incurring losses. Option B is the correct answer as it represents the margin of safety in dollars. The other answer choices are either the break-even point or unrelated to the question.
Explanation :
Learning Objectives
- Acquire knowledge on the calculation and analysis of the margin of safety, expressed both in dollars and as a percentage relative to sales.
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