Question

TB MC Qu. 6-107 Mcmurtry Corporation sells a product for ... Mcmurtry Corporation sells a product for $250 per unit. The product's current sales are 13,600 units and its break-even sales are 10,608 units. The margin of safety as a percentage of sales is closest to:

Answer 1

The answer is 22%

Step-by-step explanation:

Margin of Safety equals:

(Current sales level - break-even point) ÷ Current sales level

Break-even sales = $2,652,000 (10,608 units x $250 per unit)

Current sales = $3,400,000 (13,600 units x $250 per unit)

Therefore, Margin of Safety is:

($3,400,000 - $2,652,000) ÷ $3,400,000

= 0.22

Expressed as a percentage = 22%