Question

In: Accounting

Unistar Computers makes and sells a unique computer that is designed for a specific market. Cost...

Unistar Computers makes and sells a unique computer that is designed for a specific market. Cost information relating to that product is shown below:
Sales price $ 1,500 per unit
Variable costs $ 1,000 per unit
Fixed costs $ 120,000 total

Unistar expects to make and sell 300 computers. Based on this information, the margin of safety expressed in units is:

Multiple Choice

  • 60 units.

  • 300 units.

  • 240 units.

  • 120 units. please include formulas so i can see how you arrived at your answer. Thank you

Solutions

Expert Solution

Margin of safety in units = Current sales units - Break even point units

Break even point units = Fixed costs / Contribution margin per unit

Break even point units = $120,000 / $500 ($1,500-$1,000) = 240 units

Margin of safety in units = 300 - 240 = 60 units

Hence option 60 units is correct.

ekkarill92 answered 2 years ago
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