Margin of Safety Comer Company produces and sells strings of colorful indoor/outdoor lights for holiday display to retai...
Margin of Safety
Comer Company produces and sells strings of colorful indoor/outdoor lights for holiday display to retailers for $9.52 per string. The variable costs per string are as follows:
| Direct materials | $1.87 |
| Direct labor | 1.70 |
| Variable factory overhead | 0.57 |
| Variable selling expense | 0.42 |
Fixed manufacturing cost totals $297,600 per year. Administrative cost (all fixed) totals $225,680. Comer expects to sell 241,500 strings of light next year.
Required:
1. Calculate the break-even point in
units.
units
2. Calculate the margin of safety in
units.
units
3. Calculate the margin of safety in
dollars.
$
Homework Answers
Fixed cost= 297,600+225,680 = 523,280
Contribution margin per unit = Sales - Variable costs
= 9.52 - (1.87+1.70+0.57+0.42) = 4.96
1)
Breakeven point in units
= Fixed cost/Contribution margin per unit
= 523,280/4.96
= 105,500
2)
Margin of Safety = Sales - Breakeven sales
= 241,500 - 105,500
= 136,000
3)
Margin of Safety = 136,000*9.52
= 1,294,720
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Hello!
Can someone please explain how to solve this to me? I am stuck
and I can't find this problem in my textbook,
thanks!
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