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 $ 23
Variable expense per unit $ 14
Fixed expense per month $ 7,290
Unit sales per month $ 960
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 (i.e. 0.1234 should be entered as 12.34).)
Contribution margin=Sales-Variable cost
=(23-14)=$9 per unit
Breakeven=Fixed expenses/Contribution margin
=(7290/9)=810 units
Margin of safety=Total sales-Breakeven sales
=960-810
=150 units
=(150*23)
=$3450
Margin of safety%=Margin of safety/Total sales
=150/960
=15.63%(Approx)
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