Question

Hyde's Headphones sells deluxe headphones for $90 each. Unit variable expenses total $70. The breakeven sales in units is 1000 and budgeted sales in units is 4620. What is the margin of safety in dollars?

Answer 1

0.7835 or 78.35%

Step-by-step explanation:

Budgeted Sales = $90 per unit x 4620 units = $415,800

Break-Even Sales (Revenue) = 1000 units x $90 per unit = $90,000 units

Margin of safety = (Budgeted Sales - Break-Even Sales) ÷ Budgeted Sales

Margin of Safety = ($415,800 - $90,000) ÷ $415,800 = 0.7835 or 78.35%