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Marshall Company had actual sales of $600,000 when break-even sales were $420,000. What is the margin of safety ratio?a.25%.b.30%.c.33.33%d.45%Clear my choice

Question

Marshall Company had actual sales of 600,000whenbreakevensaleswere600,000 when break-even sales were 420,000. What is the margin of safety ratio?a.25%.b.30%.c.33.33%d.45%Clear my choice

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Solution

To calculate the margin of safety ratio, we need to first determine the margin of safety. The margin of safety is the difference between actual sales and break-even sales.

Margin of Safety = Actual Sales - Break-even Sales Margin of Safety = 600,000600,000 - 420,000 Margin of Safety = $180,000

Next, we can calculate the margin of safety ratio by dividing the margin of safety by actual sales and multiplying by 100.

Margin of Safety Ratio = (Margin of Safety / Actual Sales) * 100 Margin of Safety Ratio = (180,000/180,000 / 600,000) * 100 Margin of Safety Ratio = 30%

Therefore, the margin of safety ratio is 30%.

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