Jorgensen Company has sales of $380,000,000, and the break-even point in sales dollars is $323,000,000. Determine Jorgensen Company's margin of safety as a percent of current sales. 35 X %
Jorgensen Company has sales of $380,000,000, and the break-even point in sales dollars is $323,000,000. Determine Jorgensen Company's margin of safety as a percent of current sales. 35 X %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![**Margin of Safety**
Jorgensen Company has sales of $380,000,000, and the break-even point in sales dollars is $323,000,000.
Determine Jorgensen Company’s margin of safety as a percent of current sales.
---
There is a text box with the number "35" inside it and a red "X" next to it, followed by the percent sign ("%").
This indicates a calculation error, where 35% is likely not the correct margin of safety. To find the correct margin of safety percentage, use the formula:
\[ \text{Margin of Safety \%} = \left(\frac{\text{Current Sales} - \text{Break-even Sales}}{\text{Current Sales}}\right) \times 100 \]
In this case:
\[ \text{Margin of Safety \%} = \left(\frac{380,000,000 - 323,000,000}{380,000,000}\right) \times 100 \]
\[ \text{Margin of Safety \%} = \left(\frac{57,000,000}{380,000,000}\right) \times 100 \]
\[ \text{Margin of Safety \%} \approx 15\% \]
This corrected calculation should improve the educational content for users learning about financial metrics.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3717f9df-8e3e-4fb1-bc0e-e458f495caa3%2F4c5977fa-c7ce-48ce-a844-6d6ce346a37d%2F6v6ko4_processed.png&w=3840&q=75)
Transcribed Image Text:**Margin of Safety**
Jorgensen Company has sales of $380,000,000, and the break-even point in sales dollars is $323,000,000.
Determine Jorgensen Company’s margin of safety as a percent of current sales.
---
There is a text box with the number "35" inside it and a red "X" next to it, followed by the percent sign ("%").
This indicates a calculation error, where 35% is likely not the correct margin of safety. To find the correct margin of safety percentage, use the formula:
\[ \text{Margin of Safety \%} = \left(\frac{\text{Current Sales} - \text{Break-even Sales}}{\text{Current Sales}}\right) \times 100 \]
In this case:
\[ \text{Margin of Safety \%} = \left(\frac{380,000,000 - 323,000,000}{380,000,000}\right) \times 100 \]
\[ \text{Margin of Safety \%} = \left(\frac{57,000,000}{380,000,000}\right) \times 100 \]
\[ \text{Margin of Safety \%} \approx 15\% \]
This corrected calculation should improve the educational content for users learning about financial metrics.
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