Question

Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month’s budget appear below:

Selling price		$28	per unit
Variable expenses		$17	per unit
Fixed expenses		$8,910	per month
Unit sales		960	units per month

Required:
1.	Compute the company’s margin of safety. (Do not round intermediate calculations.)

     
  

2.	Compute the company’s margin of safety as a percentage of its sales. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).

     

Answer 1

The company’s margin of safety is $4200

The company’s margin of safety as a percentage of its sales is 15.63%

1)        Margin of safety         =         Total Sales        -        Break even Sales

                                               =                 960        -                  810

                                               =        150 Units                

                                        

        Margin of safety        =        Margin of safety in units        ×        Selling price per unit

                                          =                      150        ×        $28

                                           =                       $4,200                

                                         

        Working:                                

       

             

=   

=          810               

                                       

2)   

  

    =        15.63%