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 $ 17 $ 6,720 990 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).) $ 10,680 1. Margin of safety (in dollars) 2. Margin of safety percentage

Answer 1

Margin of safety = Actual sales - Bep sales Actual sales Bep sales Margin of safety (in dollars) 24750.000 21000.00 3750.00 Margin of safety Percentage = Margin of safety / Actual sales ) *100 Margin of safety 3750 Actual sales 24750 Margin of safety percentage 15.15% Explanation: BEP Dollars = Fixed Expenses /Unit Contribution margin Ratio Sales Less: Variable cost Contribution margin Contribution margin Ratio = Contribution margin / Sales Fixed expenses New breakeven point Dollars sales (Fixed expenses / CMR) L 24750 16830 7920 32% 6720 21000