A manufacturer of premium wire strippers has supplied the following data:

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

Question

A manufacturer of premium wire strippers has supplied the following data:
 
-The company's margin of safety in units is closest to:

Quizplus · Accepted Answer

Contribution margin = Sales - Variable expenses
= $4,176,000 - ($2,871,000 + $348,000)
= $4,176,000 - $3,219,000 = $957,000
Unit CM = Contribution margin ÷ Unit sales
= $957,000 ÷ 580,000 units = $1.65 per unit
Unit sales to break even = Fixed expenses ÷ Unit CM
= ($778,000 + $104,000) ÷ $1.65 per unit
= $882,000 ÷ $1.65 per unit = 534,545 units
Margin of safety in units = Total budgeted (or actual) sales - Unit sales to break even
= 580,000 units - 534,545 units = 45,455 units

A Manufacturer of Premium Wire Strippers Has Supplied the Following