A manufacurer of premium wire strippers has supplied the following data: Units p

Question

A manufacurer of premium wire strippers has supplied the following data:

Units produced and sold: 560,000

Sales Revenue 4,704,000

Variable manufacturing expense 2,436,000

Fixed manufacturing expense 1,200,000

Variable selling and admin expense 616,000

Fixed selling and admin expense 272,000

Net operating income 180,000

The company's margin of safety in units is closest to:

C) 61,017

I know that C is the right answer, I don't know how to get to it. Please don't bother if you're just going to give the answer, again, I all ready know that. I need the calculations!

I know that margin of safety = sales -- break even sales, but I am getting a break even units number that is bigger than sales, and that can't be right because all possible answers are positive. I can't figure out where I am going off the rails, thanks if you can help get me back on track, so to speak!!!

Explanation / Answer

sale price of 1 unit - 4,704,000/560,000=8.4 variable cost of 1 unit- 3052000/560000=5.45 contributin= 8.4-5.45=2.95 fixed cost=1472000 break even sales in units= f.cost/cont per unit= 1472000/2.95=498983 margin of safety in units=560,000-498983=61017

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