Asked by Nicole Nagatoshi on Apr 30, 2024
Verified
Bolton Industries had actual sales of $1000000 when break-even sales were $600000. What is the margin of safety ratio?
A) 40%
B) 33%
C) 60%
D) 67%
Margin Of Safety
The difference between actual sales and break-even sales, indicating how much sales can fall before a business incurs a loss.
Break-Even Sales
The amount of revenue required to cover both the fixed and variable costs of production.
Actual Sales
The exact amount of sales revenue that a company has generated over a specific period, as opposed to projected or forecasted sales.
- Calculate break-even points and margins of safety in both units and dollars.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
A
Explanation :
The margin of safety ratio is calculated as (Actual Sales - Break-even Sales) / Actual Sales. So, ($1,000,000 - $600,000) / $1,000,000 = $400,000 / $1,000,000 = 0.4 or 40%.
Learning Objectives
- Calculate break-even points and margins of safety in both units and dollars.