Question

Flannigan Company manufactures and sells a single product that sells for $550 per unit; variable costs are $297. Annual fixed costs are $966,000. Current sales volume is $4,300,000. Compute the current margin of safety in dollars for Flannigan Company Multiple Choice $1,578,360. $2,.200,000. $2,100,000 $2,988,720 $3.,433.189

Answer 1

	CALCULATION OF CONTRIBUTION MARGIN
	PARTICULARS	AMOUNT
	Selling Price Per Unit=	$                         550
	Less: Variable Cost Per Unit	$                         297
	Contribution Margin Per Unit	$                         253
	CALCULATION OF THE BREAK EVEN POINT OF SALES
	Break Even point =      Fixed Cost / Contribution Margin Per Unit
	Break Even point =
	Fixed Cost =	$               9,66,000
	Divide By	"/" By
	Contribution Margin Per Unit =	$                         253
	Break Even point =	3,818	Units
	So Break Even Sales = 3,818 Unit X $ 550 =	21,00,000
	Margin of Safety = Current Sales Level - Break Even Sales
	Margin of Safety = $ 4,300,000 - $ 2,100,000
	Margin of Safety = $ 2,200,000
	So, Answer = Option 2 = $ 2,200,000 / -