D Chapter 3 HW C D Not secure ezto.mheducation.com/hm.tpx Molander Corporation i

Question

D Chapter 3 HW C D Not secure ezto.mheducation.com/hm.tpx Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month's budget appear below Selling price Variable expenses Fixed expenses Unit sales $26 per unit $17 per unit $7,920 per month 1,030 units per month Required: 1. Compute the company's margin of safety. (Do not round intermediate calculations.) Margin of 2. Compute the company's margin of safety as a percentage of its sales. (Round your percentage answer to 2 decimal places (i.e.1234 should be entered as 12.34). Margin of safety Hints References eBook & Resources

Explanation / Answer

1.

Margin of safety = Sales - Breakeven point in sales dollars

Sales = Number of units sold x Selling price per unit = 1,030 x $26 = $26,780

Breakeven point in sales dollars = Fixed expenses/Contribution margin ratio = $7,920/[($26-$17)/$27] = $22,880

Therefore,

Margin of safety = $26,780 - $22,880 = $3,900

2.

Margin of safety as a percentage of sales = (Margin of safety/Sales) x 100

Margin of safety = $3,900

Sales = $26,780

Therefore,

Margin of safety as a percentage of sales = ($3,900/$26,780) x 100 = 14.56%

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