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 $ 13 $10,440 1,020 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

Answer

--Requirement 1 and 2

A	Selling price	$25
B	Variable expense	$13
C = A -B	Unit Contribution margin	$12
D	Fixed expenses	$10,440
E = D/C	Break even in units	870
F	Unit Sales	1020
G = F - E	Margin of Safety in units	150
H = G x A	Margin of Safety (in dollars)	$3,750	Answer [1]
I = G/F	Margin of Safety as a % of sale	14.71%	Answer [2]