The following monthly data are available for the Eager Company and its only product: $$\begin{array} { | l | l | }
\hline \text { Unit sales price } & \$ 75 \
\hline \text { Unit variable expenses } & \$ 30 \
\hline \text { Total fixed expenses } & \$ 180,000 \
\hline \text { Actual sales for the month of March } & 7,000 \text { units } \
\hline
\end{array}$$ The margin of safety for the company for March was:

Question

The following monthly data are available for the Eager Company and its only product: $$\begin{array} { | l | l | } 
\hline \text { Unit sales price } & \$ 75 \
\hline \text { Unit variable expenses } & \$ 30 \
\hline \text { Total fixed expenses } & \$ 180,000 \
\hline \text { Actual sales for the month of March } & 7,000 \text { units } \
\hline
\end{array}$$ The margin of safety for the company for March was:

Quizplus · Accepted Answer

The margin of safety is calculated as actual sales minus break-even sales. Break-even sales in units = Total fixed expenses / (Unit sales price - Unit variable expenses) = $180,000 / ($75 - $30) = 4,000 units. Actual sales = 7,000 units. Margin of safety in units = 7,000 - 4,000 = 3,000 units. In dollars, it's 3,000 units * $75 = $225,000.

The Following Monthly Data Are Available for the Eager Company