Berea Company expects to sell 19,000 units.Total fixed costs are $84,000 and the contribution margin per unit is $6.00.Berea's tax rate is 40%.What is the margin of safety in units?
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 by subtracting the break-even point in units from the expected sales units. The break-even point is calculated as total fixed costs divided by the contribution margin per unit. Here, $84,000 / $6.00 = 14,000 units. Therefore, the margin of safety is 19,000 - 14,000 = 5,000 units.

Berea Company Expects to Sell 19,000 Units