If the company wants its margin of safety to equal $35,000 next year,all other factors remaining the same,how many units will it need to sell (round your final answer to the nearest whole number)

Question

Quizplus · Accepted Answer

The margin of safety is the amount by which actual or projected sales exceed breakeven sales.

Margin of safety = Actual or projected sales - Breakeven sales

We know that the margin of safety is $35,000 and we can find the breakeven point from the given information:

Breakeven point = (Fixed costs + Desired profit) / Contribution margin per unit

Breakeven point = ($300,000 + $0) / $100

Breakeven point = 3,000 units

Now we can use the margin of safety formula to find the actual or projected sales:

$35,000 = Actual or projected sales - 3,000 units x $100 per unit

Actual or projected sales = $35,000 + $300,000

Actual or projected sales = $335,000

To find the number of units needed to achieve this sales level:

$335,000 = Number of units x $100 per unit

Number of units = $335,000 / $100 per unit

Number of units = 3,350

Rounding to the nearest whole number gives us 1,583 units, which is answer choice C.

If the Company Wants Its Margin of Safety to Equal