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If the margin of safety for Porter Company was 20 percent fixed costs were 600000 and variable costs were 70 percent of sales what was the amount of actual sales?
Wiki User
∙ 9y ago
Break even sales - Fixed cost / contribution margin ratio
Break even sales = 600000 / 0.3 = 2000000
Margin of safety = actual sales - breakeven sales
Break even sales + margin of safety = Actual sales
2000000 + 0.2(actual sales) = Actual sales
if actual sales = 1 then
2000000 + 0.2 = 1
2000000 = 0.8 actual sales
actual sales = 2000000 / 0.8
actual sales = 2500000
Wiki User
∙ 9y ago
Wiki User
∙ 9y agoBreak even sales - Fixed cost / contribution margin ratio
Break even sales = 600000 / 0.3 = 2000000
Margin of safety = actual sales - breakeven sales
Break even sales + margin of safety = Actual sales
2000000 + 0.2(actual sales) = Actual sales
if actual sales = 1 then
2000000 + 0.2 = 1
2000000 = 0.8 actual sales
actual sales = 2000000 / 0.8
actual sales = 2500000
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