Question

Please give me a right answer please if you cant answer it let someone else solve it

Margin of Safety

a. If Canace Company, with a break-even point at $608,000 of sales, has actual sales of $800,000, 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. $

2.   %

b. If the margin of safety for Canace Company was 30%, fixed costs were $1,333,500, and variable costs were 70% of sales, what was the amount of actual sales (dollars)?
(Hint: Determine the break-even in sales dollars first.)
$

Answer 1

a. Margin of Safety in dollars= (Actual Sales - Break Even Sales )

= ( $ 800,000 - $ 608,000)

= $192,000

Hence the correct answer is $ 192,000

Margin of Safety as percentage of sales =(Actual Sales - Break Even Sales )/ Actual Sales *100

= ( $ 800,000 - $ 608,000) / $ 800,000 *100

= $ 192,000 / $ 800,000 *100

= 24%

Hence the correct answer is 24%

b. Margin of Safety as percentage of sales =(Actual Sales - Break Even Sales )/ Actual Sales *100

30% = ( Actuals Sales - $ 4,445,000) / Actual Sales *100

or 0.3 * Actual Sales =  Actuals Sales - $ 4,445,000

or $ 4,445,000 =  Actuals Sales - 0.3  Actuals Sales

or $ 4,445,000 = 0.7 Actual Sales

or Actual Sales =   $ 4,445,000 / 0.7

= $ 6,350,000

Hence the correct answer is $ 6,350,000

Note:

Break Even Sales = Fixed Cost / Contribution Margin ratio

= $ 1,333,500 /30%

= $ 4,445,000

Contribution Margin ratio = 1- variable Cost Ratio

= 1- 70%

= 30%