A manufacturer of premium wire strippers has supplied the following data: The company's margin of safety in units is closest to:

Question

A manufacturer of premium wire strippers has supplied the following data:  The company's margin of safety in units is closest to:

Quizplus · Accepted Answer

Contribution margin = Sales - Variable expenses
= $2,448,000 - ($1,258,000 + $306,000)
= $2,448,000 - $1,564,000 = $884,000
Unit CM = Contribution margin ÷ Unit sales
= $884,000 ÷ 340,000 units = $2.60 per unit
Unit sales to break even = Fixed expenses ÷ Unit CM
= ($716,000 + $124,000)÷ $2.60 per unit
= $840,000 ÷ $2.60 per unit = 323,077 units
Margin of safety in units = Total budgeted (or actual)sales - Unit sales to break even
= 340,000 units - 323,077 units = 16,923 units

A Manufacturer of Premium Wire Strippers Has Supplied the Following