Question

Oslo Co prepared the following Contribution Format income statement based on sales volume of 1,000 units. (the relevant rage of production is 500 to 1500 units):

Sales 80,000
Var C 52,000
CM 28,000
Fixed 21,840
NOI 6,160

What is the margin of safety in dollars? What is the margin of safety in %?

Answer 1

The margin of safety in dollars is $28,000. The margin of safety in percentage is 35%.

Step-by-step explanation:

The margin of safety in dollars can be calculated by subtracting the breakeven point from the actual sales. In this case, the breakeven point is at 500 units, so the margin of safety can be calculated as:

Margin of Safety = Actual Sales - Breakeven Point

Margin of Safety = $80,000 - $52,000 = $28,000

The margin of safety in percentage can be calculated by dividing the margin of safety in dollars by the actual sales and then multiplying by 100. In this case, the margin of safety in percentage can be calculated as:

Margin of Safety in % = (Margin of Safety / Actual Sales) * 100

Margin of Safety in % = ($28,000 / $80,000) * 100 = 35%