In: Accounting
Units sold | 1,180 | ||
Price | $ | 10 | |
Sales | $ | 11,800 | |
Variable manufacturing costs | 4,720 | ||
Fixed manufacturing costs | 2,360 | ||
Variable selling costs | 1,180 | ||
Fixed administrative costs | 1,180 | ||
Required:
Using the data provided, compute the margin of safety and margin of safety ratio.
mos:
mos ratio:
Margin of Saftey = Total Sales - Break Even Sales | ||
=$ 11,800 -$ 7080 | ||
Margin of Saftey = $4,720 | ||
Working Notes | ||
Sales | 11,800 | |
less : Variable costs | ||
Manufacturing costs | 4,720 | |
Selling Costs | 1,180 | 5,900 |
Contribution Margin | 5,900 |
Contribution Margin Ratio | Contribution Margin / Sales *100 | |
= $ 5900 / $ 11800 *100 | ||
=50% |
Fixed Costs : | |
Fixed Manufacturing costs | $ 2360 |
Fixed Admnistrative costs | $ 1180 |
Total Fixed Costs | $ 3540 |
Break even sales | Fixed Cost / Contribution margn ratio | |
=$ 3540 / 50% | ||
=$7080 |
margin of safety ratio | =Total Sales - Break Even Sales/Total Sale | |
=$4,720/$11,800*100 | ||
40% |