Question

Ensley Corporation has provided the following data concerning its only product:

Selling price $ 200 per unit
Current sales 30,300 units
Break-even sales 21,816 units
a. The margin of safety as a percentage of sales is closest to _______.

Answer 1

28%

Step-by-step explanation:

Given that,

Selling price = $ 200 per unit

Current sales = 30,300 units

Break-even sales = 21,816 units

Current sales in dollars:

= Current sales × Selling price

= 30,300 units × $200 per unit

= $6,060,000

Break even sales in dollars:

= Break-even sales × Selling price

= 21,816 units × $200 per unit

= $4,363,200

Margin of Safety as a percentage of sales:

= (Current sales in dollars - Break even sales in dollars) ÷ Current sales in dollars

= ($6,060,000 - $4,363,200) ÷ $6,060,000

= $1,696,800 ÷ $6,060,000

= 0.28 or 28%