# Margin of safety Liu Inc. has sales of $48,500,000, and the break-even point in sales dollars is$31,040,000. Determine the company’s margin of safety as a percent of current sales.

### Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

### Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

#### Solutions

Chapter
Section
Chapter 21, Problem 21.7APE
Textbook Problem

## Margin of safetyLiu Inc. has sales of $48,500,000, and the break-even point in sales dollars is$31,040,000. Determine the company’s margin of safety as a percent of current sales.

Expert Solution
To determine

Margin of Safety: It is a measure that shows the probability of decrease in the sales level before a company faces an operating loss or reaches its break-even point. It is expressed in terms of dollars of sales, unit of sales, and percent of current sales. The formula to calculate the margin of safety as a percent of current sales is as follows:

MarginofSafety=SalesSalesatBreak-EvenPointSales

To determine: the Company L’s margin of safety as a percent of current sales.

### Explanation of Solution

Determine the Company L’s margin of safety as a percent of current sales.

Sales =$48,500,000 Sales at break-even point =$31,040,000

MarginofSafety=SalesSalesatBreak-EvenPointSales×100=

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