Question

Globus Autos sells a single product. 8,400 units were sold resulting in $82,000 of sales revenue, $22,000 of variable costs, and $12,000 of fixed costs. If variable costs decrease by $1.2 per unit, the new margin of safety is ________.

Answer 1

New margin of safety = 67,958.90 or 67959 in percentage 82.88% or 83%

Working

A	Sales price [82000/8400]	$               9.76
B	Variable cost per unit {[22000/8400]-1.2}	$               1.42
C=A-B	Contribution per unit	$               8.34
D	Fixed cost	$    12,000.00
E=D/C	Breakeven Sales in units	1,438
F= E x A	Breakeven Sales in Dollars	$    14,041.10
G	Actual sales	$    82,000.00
H=G-F	Margin of Safety in Dollars	$    67,958.90
I=H/G	Margin of safety percentage	82.88%