US CMA Part 2 · Chapter 5 · Question 5 of 15
Quarry Stone Co. has budgeted sales of $900,000 and breakeven sales of $720,000. What is its margin of safety in dollars and as a percentage of budgeted sales?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $180,000; 20%
Explanation
Margin of safety = budgeted sales - breakeven sales = $900,000 - $720,000 = $180,000. As a percentage of budgeted sales: $180,000 / $900,000 = 20%. Sales could fall by this amount before the company incurs a loss.
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