Answer:
Margin of Safety =3096.7 units
Explanation:
Margin of safety is the excess of budgeted sales over and above the break-even sales figures. It depicts how much sales can fall short of target before a business starts making a loss.
The margin of safety is calculate as follows:
MOS = budgeted sales - Break-even point
Break-even point = Total general fixed cost/(sales- variable cost)
Fixed cost - 9,693, selling price - $6.84, Variable cost- 2.14
Break-even point (in units) = 9,693/(6.84-2.14)=2062.34 units
MOS = 5,159 - 2062.34= 3096.7 units
Margin of Safety =3096.7 units
