Diaz Foods produces a gourmet salsa which sells for $28 per unit.Variable costs are $8 per unit,and fixed costs are $7,000 per month.If Diaz expects to sell 1,700 units,compute the margin of safety in units.

Question

Quizplus · Accepted Answer

B)
 11ea8870_3616_7f31_bb89_5d2a15b5598e_TB5025_00 Required sales in units = (Fixed costs + Target profit) / Contribution margin per unit
Required sales in units = ($7,000 + 0) / $20 = 350 units
Expected sales - Breakeven sales = Margin of safety in units
1,700 units - 350 units = 1,350 units

Diaz Foods Produces a Gourmet Salsa Which Sells for $28