The following is last month's contribution format income statement:

What is the company's margin of safety in dollars?

Question

The following is last month's contribution format income statement:

What is the company's margin of safety in dollars?

Quizplus · Accepted Answer

To calculate the margin of safety, we need to subtract the break-even point from the actual sales. Looking at the contribution format income statement provided, we can see that the break-even point is $2,000,000 and the actual sales are $2,250,000.

Therefore, the margin of safety is:

Margin of safety = Actual Sales - Break-even point
Margin of safety = $2,250,000 - $2,000,000
Margin of safety = $250,000

So the correct answer is D) $250,000.

The Following Is Last Month's Contribution Format Income Statement