Homework Answers
Margin of safety % = (sales - break even sales)/sales
Break even sales = fixed costs/contribution margin ratio
Contribution margin ratio = (sales - variable costs)/sales
=(32-13)/32 = 59.375%
Break even sales = 159600/59.375%
=$268,800 I.e. 8400 units
Hence margin of safety percentage = (21500- 8400)/21500
= 60.9302%
I.e. 60.93%
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Gibson Company makes a product that sells for $30 per unit. The
company pays $11 per unit for the variable costs of the product and
incurs annual fixed costs of $161,500. Gibson expects to sell
22,600 units of product.
Required
Determine Gibson’s margin of safety expressed as a percentage.
(Round your answer to 2 decimal places (i.e., .2345 should
be entered as 23.45).)
Margin of safety
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