Question

12) use the following information to determine the margin of safety in dollars: unit sales 50,000 units dollar sales $ 500,000 fixed costs $ 204,000 variable costs $ 187,500 a) $88,500. b) $108,500. c) $173,600. d) $326,400. e) $500,000.

Answer 1

So the option c($173,600) is the correct answer.

$\text { Contribution margin ratio }=\frac{\text { Sales }-\text { Variable costs }}{\text { Sales }} \times 100$
$\text { Contribution margin ratio }=\frac{\ 500,000-\ 187,500}{\ 500,000} \times 100$

$\text { Contribution margin ratio }=\frac{\ 312,500}{\ 500,000} \times 100$

$\text { Contribution margin ratio }=62.50 \%$

$\text { Break }-\text { even sales }=\frac{\text { Fixed cost }}{\text { Contribution margin ratio }}$

$\text { Break }-\text { even sales }=\frac{\ 204,000}{62.50 \%}$

$\text { Break }-\text { even sales }=\frac{\ 204,000}{0.6250}$

$\text { Break-even sales }=\ 326,400$

Margin of safety in dollars = Actual sales - Break-even sales

Margin of safety in dollars = $500,000 - $326,400

Margin of safety in dollars = $173,600

Therefore the correct option is C

What is Margin of Safety?
Break-even seals are subtracted from the actual or anticipated quantity of sales to determine the margin of safety. Therefore, a company's access amount of sales above the break-even point is its margin of safety.

To learn more about Margin of Safety

https://brainly.com/question/9797559

#SPJ4