# Margin of Safety Ratio

Breakeven sales in units:

5X = 2X + 900000

(Sales Price *X= Variable cost *X+ Fixed Cost)

$3X = $900000

  X = 300000 units

(2) Breakeven sales in dollars:

300000 units X $5 per unit = $1500000

(c) (1) Margin of safety in dollars: $2000000 - $1500000 = $500000 (Actual Sales-Breakeven sales)

(2) Margin of safety ratio: $500000 ÷ $2000000 = 25%

Margin of Safety Ratio = (expected sales - breakeven sales) / Actual sales.

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Embleton Company

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#### Solution Preview

Breakeven sales in units:

5X = 2X + 900000

(Sales Price *X= Variable cost *X+ Fixed Cost)

$3X = $900000

  X = ...

#### Solution Summary

This provides the steps to calculate the Margin of Safety Ratio.