Columbus Industries makes a product that sells for $25 a unit.The product has a $5 per unit variable cost and total fixed costs of $9,000.At budgeted sales of 2,000 units,the margin of safety ratio is:
A) 22.5%.
B) 10%.
C) 77.5%.
D) None of these.

Question

Quizplus · Accepted Answer

Break-even point in units = Fixed costs ÷ Contribution margin per unit
Break-even point in units = $9,000 ÷ ($25 - $5)= 450 units
Margin of safety = (Budgeted sales - Break-even sales)÷ Budgeted sales
Margin of safety = (2,000 units - 450 units)÷ 2,000 units = 77.5%

Columbus Industries Makes a Product That Sells for $25 a Unit.The