The Smith Corporation has the following data for the current year: $$\begin{array} { l l }
\text { Selling price per unit } & \$ 15 \
\text { Variable cost per unit } & \$ 9 \
\text { Fixed costs } & \$ 45,000 \
\text { Units sold } & 10,000 \text { units }
\end{array}$$
- What will be the margin of safety expressed in sales revenue?

Question

The Smith Corporation has the following data for the current year: $$\begin{array} { l l } 
\text { Selling price per unit } & \$ 15 \
\text { Variable cost per unit } & \$ 9 \
\text { Fixed costs } & \$ 45,000 \
\text { Units sold } & 10,000 \text { units }
\end{array}$$
- What will be the margin of safety expressed in sales revenue?

Quizplus · Accepted Answer

Margin of safety = (Actual sales - Break-even sales)Break-even sales = Fixed costs / (Selling price per unit - Variable cost per unit)Break-even sales = $45,000 / ($15 - $9) = 7,500 unitsMargin of safety = (10,000 units - 7,500 units) * $15 = $37,500

The Smith Corporation Has the Following Data for the Current