Staley Co. manufactures computer monitors. The following is a summary of its basic cost and revenue data:Assume that Staley Co. is currently selling 600 computer monitors per month and monthly fixed costs are $80,000.
Staley Co.'s margin of safety ratio (MOS%) if 600 units are sold would be (round intermediate calculation up to nearest whole number of units):

Question

Quizplus · Accepted Answer

Margin of Safety Ratio (MOS%) = (Actual Sales - Break-Even Sales) / Actual Sales

To calculate the break-even sales, we need to use the following formula:

Break-even Sales = Fixed Costs / Contribution Margin per unit

Contribution margin per unit = Sales price per unit - Variable cost per unit
= $400 - $200
= $200

Break-even sales = $80,000 / $200
= 400 units

The actual sales are given as 600 units. Therefore, the MOS% can be calculated as follows:

MOS% = (600 - 400) / 600 x 100%
= 200/600 x 100%
= 33.3%

Rounding this value up to the nearest whole number of units gives us the answer of choice C, which is 20.5%.

Staley Co Manufactures Computer Monitors