Margin of safety OBJ. 5

a. If Canace Company, with a break-even point at $960,000 of sales, has actual sales of $1,200,000, what is the margin of safety expressed (1) in dollars and (2) as a percentage of sales?

b. If the margin of safety for Canace Company was 20%, fixed costs were $1,875,000, and variable costs were 80% of sales, what was the amount of actual sales (dollars)?

(Hint: Determine the break-even in sales dollars first.)