Margin of Safety

Kearney Company, operating at full capacity, sold 400,000 units at a price of $246.60 per unit during 2015. Its income statement for 2015 is as follows:

Sales			$ 98,640,000
Cost of goods sold			(44,500,000)
Gross profit			$ 54,140,000
Expenses:
Selling expenses	$8,000,000
Administrative expenses	3,000,000
Total expenses			(11,000,000)
Income from operations			$ 43,140,000

The division of costs between fixed and variable is as follows:

	Fixed		Variable
Cost of good sold	28%		72%
Selling expenses	25%		75%
Administrative expenses	80%		20%

Management is considering a plant expansion program that will permit an increase of $8,631,000 (35,000 units at $246.60) in yearly sales. The expansion will increase fixed costs by $3,600,000 but will not affect the relationship between sales and variable costs.

Round the answers to one decimal place.

1. Margin of safety for 2015. %

2. Margin of safety under the proposed program assuming 2015 sales. %