Question

. If Canace Company, with a break-even point at $313,500 of sales, has actual sales of $570,000, what is the margin of safety expressed (1) in dollars and (2) as a percentage of sales? Round the percentage to the nearest whole number. 1. $fill in the blank 1 2. fill in the blank 2 % b. If the margin of safety for Canace Company was 25%, fixed costs were $1,419,375, and variable costs were 75% of sales, what was the amount of actual sales (dollars)? (Hint: Determine the break-even in sales dollars first.) $fill in the blank 3

Answer 1

Canace Company

a-1) Margin of safety is:

= $256,500.

a-2) Margin of safety is:

= 55%.

b) The amount of actual sales is:

= $5,677,500.

Step-by-step explanation:

a) Data and Calculations:

Break-even point sales = $313,500

Actual sales = $570,000

Margin of safety = $256,500 ($570,000 - $313,500)

Margin of safety as a percentage of sales = 55% ($313,500/$570,000 * 100)

2) Margin of safety = 25%

Fixed costs = $1,419,375

Break-even point in sales dollars = $1,419,375

Variable costs = 75% of sales

Contribution margin at break-even point = 25% (100% - 75%) = $1,419,375

Actual sales in dollars = $5,677,500 ($1,419,375/25%)