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    Data concerning next month's budget:
    Selling price $26 per unit
    Variable expenses $14 per unit
    Fixed expenses $10,200 per month
    Unit sales 1,000 units per month

    A. Compute the company's margin of safety $
    B. Compute the company's margin of safety as a percentage of its sales

    © BrainMass Inc. brainmass.com October 4, 2022, 12:39 pm ad1c9bdddf
    https://brainmass.com/business/profit-margin/margin-safety-385074

    SOLUTION This solution is FREE courtesy of BrainMass!

    Margin of safety
    Data concerning next month's budget:
    Selling price $26 per unit
    Variable expenses $14 per unit
    Fixed expenses $10,200 per month
    Unit sales 1,000 units per month

    A. Compute the company's margin of safety $

    Breakeven in units = Fixed expenses/(Selling price - Variable expenses)
    = $10,200/($26 - $14) = 850 units

    Margin of safety in units = Actual sales in units - Breakeven in units
    = 1,000 units - 850 units = 150 units

    Margin of safety $ = 150 units x $26 = $3,900

    B. Compute the company's margin of safety as a percentage of its sales

    Margin of safety percentage = margin of safety in dollars/total budgeted sales
    Margin of safety percentage = $3,900/(1,000 units x $26)
    Margin of safety percentage = 0.15 or 15%

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com October 4, 2022, 12:39 pm ad1c9bdddf>
    https://brainmass.com/business/profit-margin/margin-safety-385074

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