Margin of safety as excess of actual sales over break-even sales

Steps:

• Calculate contribution margin: $230,000 sales -$92,000 variable costs = $138,000
• Calculate contribution margin ratio: $138,000 /$230,000 = 0.6
• Calculate break-even sales: $60,000 fixed costs / 0.6 =$100,000
• Calculate margin of safety: $230,000 actual sales -$100,000 break-even sales = $130,000

Why B is correct:

• Margin of safety is actual sales minus break-even sales, per cost-volume-profit analysis formula.

Why the others are wrong:

• A: Equals break-even sales, not the excess over it.
• C: Possible error subtracting profit from fixed costs ($60,000 -$78,000, but negative).
• D: Unclear miscalculation, perhaps confusing with partial ratios.

Final answer: B