A company that makes organic fertilizer has supplied the following data:

-The company's margin of safety in units is closest to:

Question

A company that makes organic fertilizer has supplied the following data:
 
-The company's margin of safety in units is closest to:

Quizplus · Accepted Answer

Selling price per unit = $1,560,000 ÷ 200,000 units = $7.80 per unit
Variable expense per unit = ($660,000 + $180,000) ÷ 200,000 units
= $840,000 ÷ 200,000 units = $4.20 per unit
Unit CM = Selling price per unit - Variable expenses per unit
= $7.80 per unit - $4.20 per unit = $3.60 per unit
Fixed expenses = ($448,000 + $214,000) = $662,000
Unit sales to break even = Fixed expenses ÷ Unit CM
= $662,000 ÷ $3.60 per unit = 183,889 units
Margin of safety = Total actual sales - Break-even sales
= 200,000 units - 183,889 units = 16,111

A Company That Makes Organic Fertilizer Has Supplied the Following