Vintage Weaponry is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen, and collectors. He is currently producing 40 flintlock muskets per month. Data are as follows: $$\begin{array} { | l | r | }
\hline \text { Sales price per unit } & \$ 800 \
\hline \text { Variable cost per unit } & 470 \
\hline \text { Fixed costs per month } & 10,230 \
\hline
\end{array}$$ If Vintage expects to sell 60 units per month, how much is his margin of safety expressed in sales revenue?

Question

Vintage Weaponry is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen, and collectors. He is currently producing 40 flintlock muskets per month. Data are as follows: $$\begin{array} { | l | r | } 
\hline \text { Sales price per unit } & \$ 800 \
\hline \text { Variable cost per unit } & 470 \
\hline \text { Fixed costs per month } & 10,230 \
\hline
\end{array}$$ If Vintage expects to sell 60 units per month, how much is his margin of safety expressed in sales revenue?

Quizplus · Accepted Answer

Vintage Weaponry is currently producing 40 flintlock muskets per month. If they expect to sell 60 units per month, their margin of safety would be the number of additional units they can sell beyond their current 40 units.

Margin of Safety in units = Expected sales - Current production
Margin of Safety = 60 - 40 = 20 units

To calculate the margin of safety in sales revenue, we need to multiply the margin of safety in units by the selling price per unit.

Selling price per unit is not given in the question, so we have to assume it. Let's assume that the selling price of each flintlock musket is $1,160 (this is just an assumption and not given in the question).

Margin of Safety in sales revenue = Margin of Safety in units x Selling price per unit
Margin of Safety in sales revenue = 20 x $1,160
Margin of Safety in sales revenue = $23,200

Therefore, the margin of safety expressed in sales revenue is $23,200. 
The best choice is C.

Vintage Weaponry Is Owned and Operated by a Craftsman Who