Dean Company has sales of $240,000, and the break-even point in sales dollars is $127,200. Determine the company's margin of safety percentage. Round answer to the nearest whole number.
Dean Company has sales of $240,000, and the break-even point in sales dollars is $127,200. Determine the company's margin of safety percentage. Round answer to the nearest whole number.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![**Problem Statement:**
Dean Company has sales of $240,000, and the break-even point in sales dollars is $127,200. Determine the company's margin of safety percentage. Round the answer to the nearest whole number.
**Explanation:**
- Margin of Safety is a financial metric used to measure the risk level of a business’s operations.
- It is calculated using the formula:
\[
\text{Margin of Safety Percentage} = \left(\frac{\text{Actual Sales} - \text{Break-Even Sales}}{\text{Actual Sales}}\right) \times 100
\]
**Solution Steps:**
1. **Calculate the Difference:** Subtract the break-even sales from the actual sales.
\[
240,000 - 127,200 = 112,800
\]
2. **Find the Percentage:** Divide the result by the actual sales and multiply by 100.
\[
\left(\frac{112,800}{240,000}\right) \times 100 = 47\%
\]
3. **Round the Answer:** The margin of safety percentage to the nearest whole number is 47%.
**Answer Box:**
- The company’s margin of safety percentage is **47%**.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F034c8dbf-c1e3-4fe7-a5c2-11d6cef5d635%2F54cd17e7-1d5a-4fc0-8b32-6f9acc1f7833%2F9s9nzi5_processed.png&w=3840&q=75)
Transcribed Image Text:**Problem Statement:**
Dean Company has sales of $240,000, and the break-even point in sales dollars is $127,200. Determine the company's margin of safety percentage. Round the answer to the nearest whole number.
**Explanation:**
- Margin of Safety is a financial metric used to measure the risk level of a business’s operations.
- It is calculated using the formula:
\[
\text{Margin of Safety Percentage} = \left(\frac{\text{Actual Sales} - \text{Break-Even Sales}}{\text{Actual Sales}}\right) \times 100
\]
**Solution Steps:**
1. **Calculate the Difference:** Subtract the break-even sales from the actual sales.
\[
240,000 - 127,200 = 112,800
\]
2. **Find the Percentage:** Divide the result by the actual sales and multiply by 100.
\[
\left(\frac{112,800}{240,000}\right) \times 100 = 47\%
\]
3. **Round the Answer:** The margin of safety percentage to the nearest whole number is 47%.
**Answer Box:**
- The company’s margin of safety percentage is **47%**.
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