As noted in the text, the margin of safety (MOS) represents the amount by which sales (either actual or budgeted) can fall before the organization experiences a loss. On the other hand, the margin of safety ratio (MOS%) is the percentage by which sales can fall before a loss is experienced. This ratio is defined as MOS divided by budgeted or actual sales. Both measures are rough indicators of risk. Use the definition of MOS% and your algebraic skills to respond to the following requirement.
Required
Demonstrate, using separate equations for MOS% and DOL that MOS% and DOL are functionally related. Specifically, show that MOS% = 1 ÷ DOL. Of what interpretive or managerial value is this finding?