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Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger
Edition 6ISBN: 978-1305103962Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger
Edition 6ISBN: 978-1305103962 Exercise 28
Margin of Safety
Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense). Break-even units equal 1,650.
Required:
1. Calculate the margin of safety in terms of the number of units.
2. Calculate the margin of safety in terms of sales revenue.
Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense). Break-even units equal 1,650.
Required:
1. Calculate the margin of safety in terms of the number of units.
2. Calculate the margin of safety in terms of sales revenue.
Explanation
Verified
Verified
Margin of safety ratio:
If the margin o...
Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger
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