The margin of safety in dollars is 173,390.
Deluxe headphones are sold for $70 each.
Unit variable expenses total $60.
The breakeven sales in units is $ 1700.
Budgeted sales in units is $ 4177.
Margin of safety is an investing principle that involves only procuring a security when its market price is substantially less than its intrinsic value.
The margin of safety formula is equal to current sales minus the breakeven point, divided by current sales.
Margin safety alerts the management against the risk of a loss that is about to happen. A lower margin of safety may force the company to cut budgeted expenditure.
The margin of safety in dollars = (4177 x 70)- (1700 x70)
Thus the margin would be $ 173,390.
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