Question
A project has an installed capacity of 1,00,000 units. The break‑even sales level is estimated at 55,000 units and expected sales are projected at 70,000 units. The bank wants to assess the operating cushion available. What is the Margin of Safety (%)?
Solution
(70,000 – 55,000) / 70,000 ≈ 21.43%.
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