Question

Palomo corporation sells a product for $170 per unit. the product's current sales are 35,200 units and its break-even sales are 25,344 units. the margin of safety as a percentage of sales is closest to:

Answer 1

In computing the margin of safety, you have to deduct the break-even point from the current sales then divide it by current sales. In the problem given above, the correct answer is 28%.

Here’s the solution:

35200 – 25344 = 9856 / 35200 = 0.28 or 28%