Answer:
The correct answer is:
13% (D)
explanation:
The margin of safety in accounting refers to the amount of sales that are above the break-even sales. It is the amount by which a company's sale can reduce, before the company stops making profit, hence it is the amount of sales that bring profit, after every cost in production has been deducted.
to calculate the margin of safety, we will first of all find the difference between the total sales and the break-even point as follows:
Total units sold = 12,700
margin of safety = 11,176 units
Break-even point = 12,700 - 11,176 = 1,524 units
Next we are asked to express the margin of safety as a percentage of the sales. This is done as follows:
(margin of safety ÷ total sales) × 100
= (1,524 ÷ 12,700) × 100 = 12%
and the closest answer in the option to 12% is 13%, hence the answer is 13%
