Question

For Sheridan Company, actual sales are $1,660,000, and break-even sales are $1,228,400.

(a)

Compute the margin of safety in dollars.

Margin of safety

$

eTextbook and Media

Save for Later

  

Attempts: 0 of 3 used

Submit Answer

Using multiple attempts will impact your score.

10% score reduction after attempt 2

(b)

Compute the margin of safety ratio.

Margin of safety ratio

%

eTextbook and Media

Answer 1

A. Margin of safety in dollars = Actual sales - breakeven sales.

Margin of safety in dollars = 1,660,000 - 1,228,400

Margin of safety in dollars = $ 431,600.

B. Margin of safety in % = (Actual sales - breakeven sales) /actual sales x 100

Margin of safety in % = (1,660,000 - 1,228,400)/1,660,000 x 100

Margin of safety in % = 431,600/1,660,000 x 100

Margin of safety in % = 26%.

SUMMARY:

1. Margin of safety in dollars = $ 431,600.

2. Margin of safety in % = 26%