Answer:
Canace Company
a-1) Margin of safety is:
= $256,500.
a-2) Margin of safety is:
= 55%.
b) The amount of actual sales is:
= $5,677,500.
Explanation:
a) Data and Calculations:
Break-even point sales = $313,500
Actual sales = $570,000
Margin of safety = $256,500 ($570,000 - $313,500)
Margin of safety as a percentage of sales = 55% ($313,500/$570,000 * 100)
2) Margin of safety = 25%
Fixed costs = $1,419,375
Break-even point in sales dollars = $1,419,375
Variable costs = 75% of sales
Contribution margin at break-even point = 25% (100% - 75%) = $1,419,375
Actual sales in dollars = $5,677,500 ($1,419,375/25%)
