OutlyTech Corp.expected to sell 24,000 telephone switches.Fixed costs were $12,144,000,the unit sales price was $3,200,and unit variable costs were $1,440.OutlyTech's margin of safety in units is calculated to be (rounded up to nearest whole number):

Question

Quizplus · Accepted Answer

Margin of safety is calculated as:
Margin of Safety = Actual Sales - Break-even Sales

To calculate the break-even sales in units, we use the following formula:
Break-even Sales (units) = Fixed Costs / Contribution Margin per unit

Contribution Margin per unit = Unit Selling Price - Unit Variable Costs

Using the given values, we get:
Contribution Margin per unit = $3,200 - $1,440 = $1,760

Break-even Sales (units) = $12,144,000 / $1,760 = 6,900

Actual sales = 24,000

Margin of Safety (units) = 24,000 - 6,900 = 17,100

Therefore, the margin of safety in units is 17,100, which corresponds to option B.