During May, XYZ Company sold 9,000 units and reported the following income statement: Sales ............................ $540,000 Variable costs ................... 216,000 Fixed costs ...................... 117,000 Net income ....................... $207,000 Calculate the margin of safety reported by XYZ Company for May.
Contribution margin ratio = (540000-216000)/540000= 60% Break even sales = Fixed costs/Contribution margin ratio = 117000/60%= 195000 Margin of safety = Total sales-Break even sales = 540000-195000= 345000
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