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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 hote
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 %
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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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