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 $27 per unitVariable expenses $16 per unitFixed expenses $8,910 per monthUnit sales 960 units per monthRequirement 1:Compute the company's margin of safety. (Omit the "$" sign in your response.)Margin of safety $

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Data concerning the next month's budget appear below: Selling price $27 per unit Variable expenses $16 per unit Fixed expenses $8,910 per month

Unit sales 960 units per month

First, we need to calculate the break-even point in units and dollars:

Break-even point= fixed costs/ contribution margin

Break-even point= 8,910/ (27 - 16)

Break-even point= 810 units

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 8,910 /(11/27)= $21,870

Margin of safety= current sales - Break-even point= 960 - 810= 150 units

Margin of safety in dollars= (27*960) - 21,870= 4,050