# Exercise 6-8 Compute the Margin of Safety (LO6-7) Molander Corporation is a distributor of a sun...

Exercise 6-8 Compute the Margin of Safety (LO6-7) Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month's budget appear below: 46 Selling price per unit Variable expense per unit Fixed expense per month Unit sales per month \$ 28 \$ 14 \$11,620 980 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 (.e. 0.1234 should be entered as 12.34).) es 1. Margin of safety (in dollars) 2. Margin of safety percentage %

 Contribution margin per unit           = Selling price per unit (-) Variable cost per Unit           =     \$ 28 (-) \$ 14           =     \$ 14 Break Even Sales          = (Fixed Cost / Contribution margin per unit ) x Selling price          = ( \$ 11,620 / \$ 14 ) x \$ 28          =    \$ 23,240 1) Margin of safety in dollars                 = Total sales (-) Break Even Sales                 =   ( 980 Units x \$ 28 ) (-) \$ 23,240                 =    \$ 27,440 (-) \$ 23,240 \$ 4,200 2) Margin of safety inpercentage                 = Margin of safety in dollars / Total Sales                 =    \$ 4,200 / \$ 27,440 15.31%
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