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	$	23
Variable expense per unit	$	17
Fixed expense per month	$	5,340
Unit sales per month		1,040

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. .1234 should be entered as 12.34).)

	1. Margin of safety (in dollars) 2. Margin of safety percentage %

Answer 1

Requirement: 1 Actual sales 23920 Margin of Safety Bep sales 20470 Margin of safety 3450 Requirement: 2 Margin of safety 3450 Margin of safety Percentage + Actual sales = 23920 Margin of safety Percentage 14.42% Sales units 1040 x x Selling price per unit 23 = | = Actual Sales 23920 es

Working notes Break-even-point (Dollars)sales • Contribution margin ratio 0.2608695652 Fixed cost 5340 = Break even point (Dollars) 20470 - Contribution margin variable cost 17 Selling price 23 Contribution margin Contribution margin ratio Selling price Contribution margin Contribution margin ratio 0.2608695652 23