What will be the monthly margin of safety (in dollars) if 3,000 units are sold each month?

Question

Quizplus · Accepted Answer

The monthly margin of safety is the difference between the actual sales and the breakeven sales. The breakeven sales are calculated by dividing the fixed costs by the contribution margin per unit. The contribution margin per unit is the difference between the selling price per unit and the variable cost per unit. In this case, the fixed costs are $100,000, the selling price per unit is $50, and the variable cost per unit is $33.33. Therefore, the breakeven sales are $100,000 / ($50 - $33.33) = 3,000 units. Since the actual sales are also 3,000 units, the monthly margin of safety is $0.

What Will Be the Monthly Margin of Safety (In Dollars)