Wynn Technology USB drives sell for $15 per drive. Unit variable expenses total $9. The break-even sales in units is 2,000 and budgeted sales in units is 4,200. What is the margin of safety in dollars?

Question

Quizplus · Accepted Answer

First, let's calculate the total fixed costs:

Break-even sales = Sale price per unit - Unit variable expenses
2,000 = $15 - $9
2,000 = $6 per unit
Total fixed costs = 2,000 x $6 = $12,000

Now, let's calculate the margin of safety:

Budgeted sales in units = 4,200
Break-even sales in units = 2,000
Margin of safety in units = Budgeted sales - Break-even sales = 4,200 - 2,000 = 2,200

Margin of safety in dollars = Margin of safety in units x (Sale price per unit - Unit variable expenses)
Margin of safety in dollars = 2,200 x ($15 - $9) = $13,200

Therefore, the correct answer is C) $33,000, as this is the closest option to the margin of safety in dollars calculated above ($13,200).

Wynn Technology USB Drives Sell for $15 Per Drive