Answer:
Margin of safety as a percentage of sales=0.25=25%
Option C is correct (25%)
Explanation:
Given Data:
Sale price per unit=$280
Current Sales=13,900 units
Break Even sales=10,425 units
Required:
Margin of safety as a percentage of sales=?
Solution:
Margin of safety in Dollars= Total Current Sales- Break even sales
Total Current sales=Sale price per unit*Current Sales
Total Current sales=$280*13,900
Total Current sales=$3,892,000
Break Even Sales=$280*10,425
Break Even Sales=$2,919,000
Margin of safety in Dollars= $3,892,000-$2,919,000
Margin of safety in Dollars= $973,000
Margin of safety as a percentage of sales=[tex]\frac{Margin\ of\ safety\ in\ Dollars}{Total\ current\ Sales}[/tex]
Margin of safety as a percentage of sales=[tex]\frac{\$973,000}{\$3,892,000}[/tex]
Margin of safety as a percentage of sales=0.25=25%
Option C is correct (25%)
