Question

For Cullumber Company, actual sales are $1,536,000 and break=even sales are $307,200. Compute the margin of safety in dollars

Answer 1

The margin of safety for Cullumber Company is calculated by subtracting break-even sales from actual sales, resulting in $1,228,800. This figure represents how much sales can drop before reaching the break-even point.

Step-by-step explanation:

To calculate the margin of safety for Cullumber Company, we subtract break-even sales from actual sales. The margin of safety represents the amount by which sales can drop before the company reaches its break-even point. In this case, the calculation would be:

Margin of Safety = Actual Sales - Break-Even Sales
Margin of Safety = $1,536,000 - $307,200
Margin of Safety = $1,228,800

Therefore, the margin of safety in dollars for Cullumber Company is $1,228,800.