Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Unit...
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Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense). Break-even units equal 1,650.
Required:
1. Calculate the margin of safety in terms of the number of units.
units2. Calculate the margin of safety in terms of sales revenue.
$
Homework Answers
Answer a.
Margin of Safety in units = Budgeted Unit Sales - Breakeven
Units
Margin of Safety in units = 5,000 - 1,650
Margin of Safety in units = 3,350
Answer b.
Margin of Safety in dollars = Margin of Safety in units *
Selling Price per unit
Margin of Safety in dollars = 3,350 * $75.00
Margin of Safety in dollars = $251,250
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Head-First Company plans to sell 5,000 bicycle helmets at $75
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