Delectable Foods produces a gourmet condiment that sells for $20 per unit.Variable cost is $8 per unit,and fixed costs are $5000 per month.If Delectable expects to sell 1500 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

Margin of safety = Total Sales Revenue – Break-Even Sales Revenue

Total Sales Revenue = Selling Price × Actual Sales = $20 × 1500 = $30,000

Break-Even Sales Revenue = Variable Cost × Actual Sales + Fixed Cost = $8 × 1500 + $5,000 = $17,000

Margin of Safety = $30,000 - $17,000 = $13,000 or $21,660 rounded to the nearest dollar.

Therefore, the best choice is A.

Delectable Foods Produces a Gourmet Condiment That Sells for $20