Appliances had the following revenue over the past five year

Appliances had the following revenue over the past five? years:

To predict revenues for 2018 ?, Premium Appliances uses the average for the past five years. The? company\'s breakeven revenue is $ 425,000 per year. What is Premium ?Appliances\'s predicted margin of safety for 2018 ??

A. $ 100,000

B. $ 1,000,000

C. $ 425,000

D. $ 575,000

DATA TABLE

2013     $800,000

2014     $900,000

2015     $1,100,000

2016     $1,000,000

2017     $1,200,000

Solution

The predicted margin of safety = Budgeted Revenue -  breakeven revenue

= $ 1,000,000 - $ 425,000

= $ 575,000

Hence the correct answer is D. $ 575,000

Note :

Budgeted Revenue =( $800,000 +  $900,000 +  $1,100,000+   $1,000,000 +   $1,200,000) / 5

= $ 1,000,000