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 12 $11,050 1,000 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 25000 | = | Margin of Safety Bep sales 21250 - - Margin of safety 3750 Requirement: 2 Margin of safety ratio Actual sales 25000 Margin of safety 3750 | = Margin of safety ratio 15.00% Working Notes Sales units 1000 x Selling price per unit | = | Actual Sales 25000 - = Contribution margin ratio 52% BEP Sales 21250 11050