Berea Company currently sells 19,000 units.Total fixed costs are $84,000, and the contribution margin per unit is $6.00.Berea's tax rate is 40%.The margin of safety in units is _____.
A)3,000 units
B)5,000 units
C)7,500 units
D)14,000 units

Question

Quizplus · Accepted Answer

The margin of safety in units is calculated as the difference between actual sales and break-even sales. Break-even sales in units = Total fixed costs / Contribution margin per unit = $84,000 / $6 = 14,000 units. Margin of safety = Actual sales - Break-even sales = 19,000 - 14,000 = 5,000 units.

Berea Company Currently Sells 19,000 Units