Globus Autos sells a single product. 8,000 units were sold resulting in $83,000 of sales revenue, $21,000 of variable costs, and $20,000 of fixed costs. If variable costs decrease by $1.00 per unit, the new margin of safety is ________. (Round intermediate calculations to the nearest cent.)

Question

Quizplus · Accepted Answer

Variable cost per unit = $21,000 / 8,000 = $2.63
Contribution margin percentage = [$10.38 - ($2.63 - $1.00)] / $10.38 = 0.84
New breakeven point = [$10.38 - ($2.63 - $1.00)] / $10.38 = 0.84; $20,000 / 0.84 = $23,810
Old breakeven point = $10.38 - 2.63 = $8 / $10.38 = 1; $20,000 / 1 = $20,000
Margin of safety = $83,000 - $23,810 = $59,190

Globus Autos Sells a Single Product