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 per unit Variable expense per unit Fixed expense per month Unit sales per month $ 25 $ 18 $ 5,810 980 Required: 1. What is the company's margin of safety? (Do not round intermediate calculations.) 2. What is the company's margin of safety as a percentage of its sales? (Round your percentage answer to 2 decimal places (i.e. 0.1234 should be entered as 12.34).) 1. Margin of safety (in dollars) 2. Margin of safety percentage

Answer 1

Break even unit = Fixed cost/Contribution margin per unit = 5810/(25-18) = 830 Units

a) Margin of safety (in dollars) = (980-830)*25 = $3750

b) Margin of safety (percentage) = 150/980 = 15.31%