if a business had a capacity of $10,000,000 of sales, actual sales of $6,000,000, break-even sales of $4,200,000, fixed costs of $1,800,000, and variable costs of 60% of sales, what is the margin of safety expressed as a percentage of sales?
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Question

if a business had a capacity of $10,000,000 of sales, actual sales of $6,000,000, break-even sales of $4,200,000, fixed costs of $1,800,000, and variable costs of 60% of sales, what is the margin of safety expressed as a percentage of sales?
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Accepted Answer

{ "quality": "clear", "question_count": 1, "skills_matched": [ "step_cot", "blank_filling_formatter", "explain_then_answer", "tutor", "mastery_adaptive_brevity" ], "needs_drawing": false, "concepts_used": [ "Margin of Safety" ], "new_concepts": [], "current_concepts": [ "Margin of Safety", "Break-Even Analysis" ] } ## Identify the given values Using the *Margin of Safety* knowledge point $$ \begin{aligned} &\text{Actual Sales} = \$6,000,000 \ &\text{Break-Even Sales} = \$4,200,000 \end{aligned} $$ ## Calculate the margin of safety in dollars Using the *Margin of Safety* knowledge point $$ \begin{aligned} \text{Margin of Safety (Dollars)} &= \text{Actual Sales} - \text{Break-Even Sales} \ &= \$6,000,000 - \$4,200,000 \ &= \$1,800,000 \end{aligned} $$ ## Calculate the margin of safety percentage Using the *Margin of Safety* knowledge point $$ \begin{aligned} \text{Margin of Safety Percentage} &= \frac{\text{Margin of Safety (Dollars)}}{\text{Actual Sales}} \times 100\% \ &= \frac{\$1,800,000}{\$6,000,000} \times 100\% \ &= 30\% \end{aligned} $$ If a business had a capacity of \$10,000,000 of sales, actual sales of \$6,000,000, break-even sales of \$4,200,000, fixed costs of \$1,800,000, and variable costs of 60% of sales, what is the margin of safety expressed as a percentage of sales? 30% { "subject": "Business", "question_type": "Fill-in-the-blank", "knowledge_point": [ "Business", "Accounting", "Margin of Safety" ] }

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Explanation:

Identify the given values

Calculate the margin of safety in dollars

Calculate the margin of safety percentage

Answer: