Portland Antique 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 Portland expects to sell 60 units per month,how much is his margin of safety expressed in sales revenue?

Question

Portland Antique 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 Portland expects to sell 60 units per month,how much is his margin of safety expressed in sales revenue?

Quizplus · Accepted Answer

The margin of safety in sales revenue is calculated as the difference between actual sales and break-even sales. First, calculate the break-even point in units: Fixed Costs / (Sales Price per Unit - Variable Cost per Unit) = 10,230 / (800 - 470) = 31 units. The margin of safety in units is 60 - 31 = 29 units. Therefore, the margin of safety in sales revenue is 29 units * $800 = $23,200.

Portland Antique Weaponry Is Owned and Operated by a Craftsman