Respuesta :
The company's margin of safety in both dollar and percentage terms is $136,000 and 21.79% respectively.
The margin of safety is a company's sales over and above its break-even point are considered margin of safety.
Sales of a company that exceeds its break-even point generate profit.
The formula for Margin of safety(MoS) in dollars is as follows:
[tex]Margin Of Safety In Dollars = Actual Sales - BEP Sales[/tex]
Substituting the provided values into the above calculation yields,
[tex]Margin Of Safety In Dollars = 624,000 - $488,000[/tex]
= $136,000
To calculate the Margin of safety percentage we use the following formula:
[tex]Margin Of Safety Percentage = \frac{Margin Of Safety In Dollars}{Actual Sales} * 100[/tex]
Substituting the provided values into the above calculation yields,
[tex]Margin Of Safety Percentage = \frac{136,000}{624,000} * 100[/tex]
= 21.79%
Hence, The company's margin of safety in both dollar and percentage terms is $136,000 and 21.79% respectively.
Learn more about break-even point:
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