QUESTION 41 Calculate margin of safety using the following a

QUESTION 41 Calculate margin of safety using the following assumptions: .i00 Variable cost per unit 300 ctual Sales Volume 1,7,0 unii:; O 1,000 units $500,000 1,750 units 750 units

Solution

Contribution margin=Sales price-Variable costs

=(500-300)=$200 per unit

Hence breakeven sales=Fixed cost/Contribution margin

=(200,000/200)=1000 units

Margin of safety=Total sales-Breakeven sales

=(1750-1000) units

which is equal to

750 units.