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

Question

Molander’s Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month’s budget appear below: Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month's budget appear below: $24 per unit $13 per unit Selling price Variable expenses Fixed expenses Unit sales $9,130 per month 980 units per month Required 1. Compute the company's margin of safety. (Do not round intermediate calculations.) of 2. Compute the company's margin of safety as a percentage of its sales. Round your percentage answer to 2 decimal places (e.1234 should be entered as 12.34) Hints References eBook & Resources 20 P 888 F2 14 FS 2 3 4

Explanation / Answer

Contribution margin=Selling price-Variable expenses

=(24-13)=$11 per unit

Hence breakeven point=Fixed cost/Contribution margin

=(9130/11)=830 units

Margin of safety=Total sales-Breakeven sales

=(980-830)=150 units

=(150*24)=$3600

Margin of safety%=Margin of safety/Total sales

(150/980)=15.31%(Approx).

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