Question
In: Accounting
Margin of Safety Comer Company produces and sells strings of colorful indoor/outdoor lights for holiday display...
Margin of Safety
Comer Company produces and sells strings of colorful indoor/outdoor lights for holiday display to retailers for $15.31 per string. The variable costs per string are as follows:
| Direct materials | $1.87 |
| Direct labor | 1.70 |
| Variable factory overhead | 0.57 |
| Variable selling expense | 0.42 |
Fixed manufacturing cost totals $764,325 per year. Administrative cost (all fixed) totals $557,925. Comer expects to sell 203,600 strings of light next year.
Required:
1. Calculate the break-even point in
units.
units
2. Calculate the margin of safety in
units.
units
3. Calculate the margin of safety in
dollars.
$
4. Conceptual Connection: Suppose Comer
actually experiences a price decrease next year while all other
costs and the number of units sold remain the same. Would this
increase or decrease risk for the company? (Hint: Consider
what would happen to the number of break-even units and to the
margin of safety.)
Solutions
ekkarill92 answered 1 year agoRelated Solutions
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Total variable cost
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Contribution margin
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Total fixed cost
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Operating income
$ 19,000
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$
2. Compute the margin of safety in sales
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Pigments
0.57
Selling commission
0.14
Other ingredients
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REQUIRED
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