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Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs...

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. Compute the current margin of safety in dollars for Flannigan Company.

Multiple Choice $1,560,000. $2,000,000. $2,200,000. $2,895,652. $2,460,000.

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Answer #1

Selling price for the product = $450

Variable cost for the product = $270

Contribution = $180

Contribution Margin Ratio = 40%

Total Fixed Expense = $800000

Break Even point in sales = $800,000/40% = $2,000,000

Actual Sales = $4,200,000

Margin of Safety in sales = Actual Sales - BE Sales = $2,200,000

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