Answered

Bolton Industries had actual sales of [tex]$1,000,000 when the break-even point in sales dollars was $[/tex]600,000. What is the margin of safety ratio?

1. 40%
2. 33%
3. 60%
4. 67%



Answer :

GinnyAnswer
To find the margin of safety ratio, we will follow these steps:

1. Identify the given values:
- The actual sales are [tex]$1,000,000. - The break-even sales are $[/tex]600,000.

2. Calculate the margin of safety in dollars:
- The margin of safety is the amount by which actual sales exceed the break-even sales.
- Formula: Margin of Safety = Actual Sales - Break-even Sales
- So, Margin of Safety = [tex]$1,000,000 - $[/tex]600,000 = [tex]$400,000. 3. Calculate the margin of safety ratio: - This ratio is the margin of safety expressed as a percentage of actual sales. - Formula: Margin of Safety Ratio = (Margin of Safety / Actual Sales) * 100% - So, Margin of Safety Ratio = ($[/tex]400,000 / $1,000,000) * 100% = 40.0%

The margin of safety ratio is 40%.

Thus, the correct answer is:
1) 40%.