Use the following information to determine the margin of safety in dollars:

A) $88,500.
B) $108,500.
C) $173,600.
D) $326,400.
E) $500,000.

Name: Use the following information to determine the margin of safety in dollars: A) $88,500. B) $108,500. C) $173,600. D) $326,400. E) $500,000.
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Question

Use the following information to determine the margin of safety in dollars:

A) $88,500. 
B) $108,500. 
C) $173,600. 
D) $326,400. 
E) $500,000.

Quizplus · Accepted Answer

Contribution margin ratio = ($500,000 − $187,500)/$500,000 = 62.5%
Break-even sales = $204,000/0.625 = $326,400
Margin of safety in dollars = $500,000 − $326,400 = $173,600

Use the Following Information to Determine the Margin of Safety