Question

ACME Corporation sells a product for $170 per unit. The product's current sales are 10,000 units and its break-even sales are 8,100 units. The margin of safety as a percentage of sales is closest to __________.

Answer 1

Margin of safety ratio= 0.19= 19%

Step-by-step explanation:

Giving the following information:

ACME Corporation sells a product for $170 per unit. The product's current sales are 10,000 units and its break-even sales are 8,100 units.

To calculate the margin of safety as a percentage, we need to use the following formula:

Margin of safety ratio= (current sales level - break-even point)/current sales level

Margin of safety ratio= (170*10,000 - 170*8,100) / (170*10,000)

Margin of safety ratio=(1,700,000 - 1,377,000) / 1700,000

Margin of safety ratio= 0.19= 19%