Please help, what are the answers to this question? Margin of Safety a. If Canac
ID: 2438095 • Letter: P
Question
Please help, what are the answers to this question?
Margin of Safety
a. If Canace Company, with a break-even point at $483,600 of sales, has actual sales of $620,000, 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 20%, fixed costs were $1,379,200, and variable costs were 80% of sales, what was the amount of actual sales (dollars)?
(Hint: Determine the break-even in sales dollars first.)
$
Explanation / Answer
a1 Margin of safety in dollars = 620000-483600= $136400 2 Margin of safety as a percentage of sales = 136400/620000= 22% b Break-even in sales dollars = 1379200/(1-0.8)= $6896000 Amount of actual sales (dollars) = 6896000/(1-0.2)= $8620000