Question

Gladstone Co. has expected sales of $326,000 for the upcoming month and its monthly break even sales are $300,000. What is the margin of safety as a percent of sales, rounded to the nearest whole percent

Answer 1

Answer:

8%

Explanation:

Margin of safety can be described as the level sales can fall to before a firm reaches its break-even point.

Margin of safety = $\frac{expected sales - breakeven sales}{expected sales} x 100$

[(326,000 - 300,000) / 326,000] x 100 = 0.0797 = 8%