Gallup Foods produces a gourmet condiment that sells for $22 per unit.Variable cost is $8 per unit,and fixed costs are $6,000 per month.If Gallup expects to sell 2,000 units,compute the margin of safety in dollars.(Round any intermediate calculations to the nearest whole unit,and your final answer to the nearest dollar. )

Question

Quizplus · Accepted Answer

A)
 11ea86d6_82f3_0828_92b6_895dc9a347fc_TB2804_00 Breakeven sales in units = (Fixed costs + Target profit)/ Contribution margin per unit
Breakeven sales in units = ($6,000 + 0)/ $14 = 429 units
Margin of safety in units × Sales price per unit = Margin of safety in dollars
(2,000 units - 429 units)× $22 per unit = $34,571

Gallup Foods Produces a Gourmet Condiment That Sells for $22