Lisa Manufacturing has provided the following information:
$$\begin{array} { | l | r | }
\hline \text { Breakeven point in units } & 25,000 \
\hline \text { Variable cost per unit } & \$ 875.00 \
\hline \text { Fixed costs } & \$ 8,125,000 \
\hline \text { Operating income } & \$ 1,625,000 \
\hline
\end{array}$$ What is the margin of safety in units?
A) 5,000
B) 30,000
C) 35,000
D) 1,857

Question

Lisa Manufacturing has provided the following information:
$$\begin{array} { | l | r | } 
\hline \text { Breakeven point in units } & 25,000 \
\hline \text { Variable cost per unit } & \$ 875.00 \
\hline \text { Fixed costs } & \$ 8,125,000 \
\hline \text { Operating income } & \$ 1,625,000 \
\hline
\end{array}$$ What is the margin of safety in units?
A) 5,000
B) 30,000
C) 35,000
D) 1,857

Quizplus · Accepted Answer

The margin of safety in units is calculated by subtracting the breakeven point in units from the actual or budgeted sales units. To find the actual sales units, we can use the operating income and the given costs. Operating income is calculated as (Sales - Variable Costs - Fixed Costs). Given the operating income ($1,625,000), fixed costs ($8,125,000), and variable cost per unit ($875), we can find the sales units. However, without the sales price per unit, we directly calculate the margin of safety in units by understanding that the provided information is not sufficient to calculate the actual sales units or the margin of safety directly. The correct approach involves understanding the relationship between these financial metrics, but with the given data, we cannot accurately calculate the margin of safety in units without additional information such as the sales price per unit or total sales revenue. My initial response was incorrect as it implied a direct calculation was possible with the provided information.

Lisa Manufacturing Has Provided the Following Information What Is the Margin of Safety in Units? A) 5,000

Lisa Manufacturing Has Provided the Following Information What Is the Margin of Safety in Units?
A) 5,000