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 $ 23 $ 16 $ 6,020 1,010 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 (le. 1234 should be entered as 12.34).) 1. Margin of safety in dollars) 2. Margin of safety percentage RA Next >

Answer 1

Formulas used:

1. Margin of safety as percentage= (margin of safety/Sales)*100

2. Margin of safety= Actual sales- Break even point in dollars

3.Break even point in dollars= Fixed cost/contribution margin Ratio

4. Contribution margin Ratio=(Contribution/Sales)*100

: Statement showing total Income Particulars $ sales (23 x 1010) 23230 Less: Variable Expense C16X10/0) 16160 o Contribution Margin 7070 Less: Fixed cost Total Inome 1050 6020

Combubutis Margin Rates = contributors Morgan (03 sales 7070 23230 X100= 30.4348% Break Even Point in Dollars - Fixed cost Contribution Margin Radio 6020 = $19779.989 0.304348 Margin of Safety= Actual Sales - B.E.P in Dollars 23230 - 19779.989 = $ 3450-0) Margin of safety percentage = 3450.0 l xloo = 14.85% 2 3230