value: 1.00 points Exercise 5-8 Compute the Margin of Safety [LO5-7] Molander Co
ID: 2332468 • Letter: V
Question
value: 1.00 points Exercise 5-8 Compute the Margin of Safety [LO5-7] Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month's budget appear below Selling price Variable expenses Fixed expenses Unit sales $30 per unit $15 per unit $13,350 per month 1,040 units per month Required 1. Compute the company's margin of safety. (Do not round intermediate calculations) Margin of safety 2. Compute the company's margin of safety as a percentage of its sales. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34). Margin of safetyExplanation / Answer
Margin of safety equals Total sales minus breakeven sales
To calculate margin of safety first breakeven sales will be calculated, Once Breakeven sales is calculated we then we can easily calculated margin of safety.
Selling Price
$30
Less: Variable cost
$15
Contribution Margin per Unit
$15
Breakeven sales=
(fixed cost /Contribution Per Unit)
Breakeven sales=
(13350/15)
Breakeven sales=
890 Units
Current Units sales
1040
Breakeven Units
890
Margin of safety in units
150
Margin of safety in $ (150*30)
$ 4,500.00
Answer Margin of safety = $4500
Requirement 2
Margin of safety %
(A)
Total Current sales in $
(10140*30)
$ 31,200.00
(B)
Breakeven sales in $
(890*30)
$ 26,700.00
C=(A-B)
Margin of safety
$ 4,500.00
C/Ax100
Margin of safety %
14.42%
Margin of safety = 14.42%
Selling Price
$30
Less: Variable cost
$15
Contribution Margin per Unit
$15
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