Question

The following monthly data was available for Purple Company Selling price $100 Unit variable expenses $75 Fixed expenses $75,

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Answer #1

Contribution margin = (Sale - variable cost)/ sales

1800000-1350000/1800000 = 25%

Break even point = Fixed cost/Contribution margin

75000/25% = 300000

Margin of safety % = (Sales - BEP)/Sales

1800000-300000/1800000 = 83.33%

Margin of safety in Units = Actual Sales unit * Margin of safety % calculated above = 18000*83.33% = 15000

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