Molander Corporation is a distributor of a sun umbrella used at resort hotels. D

Question

Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month's budg Selling price per unit Variable expense per unit Fixed expense per month Unit sales per month S26 S17 $ 8,810 1,040 Required: 1. What is the company's margin of safety? (Do not round intermediate calculations.) 2. What is the company's margin of safety as a percentage of its sales? (Round your percentage answer to 2 decima 1234 should be entered as 12.34).) ces 1 Margin of safety (in dollars) 2. |Margin of safety percentage

Explanation / Answer

         Selling Price per unit                         $26

Less : Variable Expenses per unit             $17

                                                           _________

       Contribution per unit                           $9

Break Even Sales (unit)     = Fixed Expense / Contribution per unit

                                                                       =   $8010/ $9= 890 Units

Break Even Sales (amount) =890 units * $26= $23,140

                                    Actual Sales amount    = 1040 Units * $26 = $27,040

1. Margin of safety (in dollars) = Actual Sales - Break Even Sales =$27,040-$23,140

                                                =$3,900

2.Margin of Safety Percentage = $3,900/$27,040= 14.42%

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