Question

ook Show Me How Calculator argin of Safety tead-First Company plans to sell 5,090 bicycle helmets at $70 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 1,980. Required: 1. Calculate the margin of safety in terms of the number of units. 11 X units 2. Calculate the margin of safety in terms of sales revenue. Feedback Cucky Wod Check My Work 2 more Check why Works

Answer 1

Calculation of Break-even number of Units: Break-even Point in Units = Total Fixed Costs/Contribution Margin Per Unit Contribution Margin Per Unit = Selling Price Per Unit - Variable Cost Per Unit = $70 - $45 = $25.00 Break-even Point in Units = Total Fixed Costs/Contribution Margin Per Unit = $49,500/$25 = 1980 Units 1. Margin of Safety in terms of Number of Units: = Expected Sales Units - Units at Break Even Point = 5090 - 1980 = 3110 Units 2. Margin of Safety in terms of Sales Revenue: = Margin of Safety in terms of Number of Units x Selling Price Per Unit = 3110 Units x $70 = $217,700.00