Vernon Company makes a product that sells for $33 per unit. The company pays $24 per...
Vernon Company makes a product that sells for $33 per unit. The company pays $24 per unit for the variable costs of the product and incurs annual fixed costs of $72,900. Vernon expects to sell 22,300 units of product.
Required: Determine Vernon’s margin of safety expressed as a percentage. (Round your answer to 2 decimal places. (i.e., .2345 should be entered as 23.45))
Homework Answers
Contribution margin=Selling price-Variable cost
=(33-24)=$9 per unit
Hence breakeven sales=Fixed cost/Contribution margin
=(72900/9)=8100 units
Hence margin of safety=Total sales-Breakeven sales
=(22300-8100)=14200 units
Hence margin of safety%=margin of safety/Total sales
=(14200/22300)
which is equal to
=63.68%(Approx).
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incurs annual fixed costs of $161,500. Gibson expects to sell
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Required
Determine Gibson’s margin of safety expressed as a percentage.
(Round your answer to 2 decimal places (i.e., .2345 should
be entered as 23.45).)
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