Question

ump-It Corporation has a margin of safety of $272,000. The company sold 100,000 units this year. If the company sells each unit for $17, the margin of safety percentage is Blank______.

Multiple choice question.

16%


14.3%


2.72%


6.25%

Answer 1

To calculate the margin of safety percentage, you first need to determine the total sales. The total sales can be calculated using the formula:

\[
\text{Total Sales} = \text{Number of Units Sold} \times \text{Selling Price per Unit}
\]

Given:
- Number of Units Sold = 100,000
- Selling Price per Unit = $17

Calculating total sales:

\[
\text{Total Sales} = 100,000 \times 17 = 1,700,000
\]

Next, the margin of safety percentage is calculated using the formula:

\[
\text{Margin of Safety Percentage} = \left(\frac{\text{Margin of Safety}}{\text{Total Sales}}\right) \times 100
\]

We already know the margin of safety is $272,000. Now we can plug the numbers into the formula:

\[
\text{Margin of Safety Percentage} = \left(\frac{272,000}{1,700,000}\right) \times 100
\]

Calculating this:

\[
\text{Margin of Safety Percentage} = \left(0.160\right) \times 100 \approx 16\%
\]

Therefore, the margin of safety percentage is **16%**.