1. Margin of safety (in dollars) = Actual sales - Break-even sales
Break-even sales (dollars) = Fixed Expense / Contribution margin ratio
Contribution margin ratio = (26 - 15) / 26 = 42.31%
Break-even sales (dollars) = $ 9,790 / 42.31% = $ 23,139
Therefore, Margin of safety (in dollars) = (26 x 1040) - 23,139
= $ 27,040 - $ 23,139
= $ 3,901
2. Margin of safety percentage = (Margin of safety / Actual sales) *100
= ($3,901 / $27,040) * 100
= 14.43%
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