What is the margin of safety percentage when budgeted sales are 15,000 and breakeven sales are 5,000?

What is the margin of safety percentage when budgeted sales are 15,000 and breakeven sales are 5,000?

• A. 66.7%
• B. 50%
• C. 33.3%
• D. 80%

Answer: (A)

The margin of safety shows how much sales can fall before hitting the break-even point. It is calculated as (budgeted sales − break-even sales) ÷ budgeted sales × 100. Here, budgeted sales are 15,000 and break-even sales are 5,000. The difference is 10,000. So the margin of safety is 10,000 ÷ 15,000 = 2/3 ≈ 66.7%. This means sales could drop by about 66.7% before the business would no longer cover its costs.

The margin of safety shows how much sales can fall before hitting the break-even point. It is calculated as (budgeted sales − break-even sales) ÷ budgeted sales × 100.

Here, budgeted sales are 15,000 and break-even sales are 5,000. The difference is 10,000. So the margin of safety is 10,000 ÷ 15,000 = 2/3 ≈ 66.7%.

This means sales could drop by about 66.7% before the business would no longer cover its costs.