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 budget appear below:

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 decimal places (i.e. .1234 should be entered as 12.34).)

Selling price per unit $ 30 Variable expense per unit $ 15 Fixed expense per month $ 12,900 Unit sales per month 1,010

Explanation / Answer

Contribution margin=SAles-VC

=(30-15)=$15 per unit

Hence breakeven=FC/Contribution margin

=(12900/15)=860 units

1.MOS=Total sales-Breakeven sales

=(1010-860)=150 units

=(150*30)=$4500

2.MOS%=MOS/Total sales

=(150/1010)=14.85%(Approx).

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