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



Selling price $27 per unit
Variable expenses $16 per unit
Fixed expenses $8,910 per month
Unit sales 960 units per month


Requirement 1:
Compute the company's margin of safety. (Omit the "$" sign in your response.)

Margin of safety $

Respuesta :

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Answer:

Margin of safety in dollars is 4050

Explanation:

The margin of safety  can be expressed in dollar amounts or number of units, we are looking the Margin of safety in dollars

The formula is:  

Margin of safety in dollars = Current sales – Breakeven sales

Current Sales= Selling price *Unit sales

Current Sales= $27 *960 units= 25920

The break-even point formula is calculated by dividing the total fixed costs of production by the price per unit less the variable costs to produce the product.

break-even point =Fixed expenses /Price-variable expenses

break-even point =$8,910 /$27 - $16

break-even point = 810

The break-even formula in sales dollars is calculated by multiplying the price of each unit by the answer from our first equation.

Break even=Selling price*break-even point in units

Break even in dollars= $27 *810

Break even in dollars= 21870

Margin of safety in dollars = Current sales – Breakeven sales

Margin of safety in dollars = $25920 – $21870= 4050

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