Question

Mcmurtry 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:_____.
a. 85%.
b. 87%.
c. 15%.
d. 13%.

Answer 1

Answer:

19%

Explanation:

Margin of safety is calculated as;

= [(Current sales - Break even sales) / Current sales ] × 100

Given that;

Current sales = 10,000 units

Break even sales = 8,100 units

Margin of safety

= [ ( 10,000 - 8,100) / 10,000 ] × 100

= [ 1,900 / 10,000 ] × 100

= 19%

Therefore, the margin of safety as a percentage of sales is closest to 19%