Cengag Google Chrome nment/takeAssignmentMain.do?invoker-assignments&takeAssignm
ID: 2438709 • Letter: C
Question
Cengag Google Chrome nment/takeAssignmentMain.do?invoker-assignments&takeAssignmentSessionLocator-assignment-take;&inprogress-false; eBook B: Show Me How Calculator Print Item Margin of Safety a. If Canace Company, with a break-even point at $284,200 of sales, has actual sales of $490,000, what is the margin of safety expressed (1) i dollars and (2) as a percentage of sale Round the percentage to the nearest whole numben. 1. 2. b. If the margin of safety for Canace Company was 40%, fixed costs were $1,552,800, and variable costs were 60% of sales, what was the amount of actual sales (dollars)? (Hint: Determine the break-even in sales dollars first.)Explanation / Answer
Break-even point = $284,200
Actual Sales = $490,000
Margin of safety (In $)= Actual Sales- Break-even sales
= $490,000- $284,200 = $205,800
Margin of safety (In %)={ Margin of safety (In $)/ Actual Sales}*100
= {(Actual Sales- Break-even sales)/ Actual Sales}*100
=($205,800/$490,000)*100 = 42%
Margin of safety (In %) = 40%
Fixed cost = $1,552,800
Variable cost % = 60%
Contribution margin(%)= 100- Variable cost % = 100-60= 40%
Break-even sales(%)= 100- Margin of safety (In %) = 100-40=60%
Break-even sales= Fixed cost/ Contribution margin(%)
= $1,552,800/ 0.4
= $3,882,000
Therefore, Actual sales = Break-even sales/ Break-even sales(%)
= $2,588,000/.60
=$6,470,000