Question

The margin of safety percentage is: total budgeted (or actual) sales in dollars divided by margin of safety in dollars total budgeted (or actual) sales in dollars divided by break-even sales in dollars margin of safety in dollars divided by break-even sales in dollars margin of safety in dollars divided by total budgeted (or actual) sales in dollars

Answer 1

Margin of safety in dollars divided by total budgeted (or actual) sales in dollars

Step-by-step explanation:

The formula to compute the margin of safety is shown below:

Margin of safety = Margin of safety in dollars ÷ total budgeted (or actual) sales in dollars

where,

The margin of safety = Total sales - break-even sales

And, the break-even sales (In dollars) = (Total fixed expenses) ÷ (contribution margin ratio)

The contribution margin ratio = (Contribution ÷ sales) × 100

So, the last option is correct and the rest options are wrong.