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For Wilder Corporation, sales is $1,200,000 (6,000 units), fixed expenses are $360,000, and the...

Question:

For Wilder Corporation, sales is $1,200,000 (6,000 units), fixed expenses are $360,000, and the contribution margin per unit is $80.

What is the margin of safety in dollars?

a) $60,000

b) $840,000

c) $300,000

d) $540,000

Margin of Safety:

The margin of safety is the cushion in units or amount by which even if the projected sales in units or dollars fall, no losses are incurred by the firm. Hence, the higher the margin of safety, the better it is for the firm. It can also be calculated in percentage by dividing the margin of safety in dollars with the projected sales.

Answer and Explanation: 1

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The calculated value of margin of safety in dollars is option c) $300,000.

The break-even point in units is given by:

  • = Total fixed expenses /...

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Margin of Safety in Accounting: Definition & Formula

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Chapter 2 / Lesson 10
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Learn about the margin of safety. Understand what the margin of safety is, identify the margin of safety formula, and learn how to calculate the margin of safety.


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