Question

# Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the...

Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month’s budget appear below:

 Selling price per unit \$ 24 Variable expense per unit \$ 12 Fixed expense per month \$ 9,600 Unit sales per month 950

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 (i.e. .1234 should be entered as 12.34).)

Statement Showing Contribution per unit and Total profit

 Description Amount Selling Price Per Unit \$24 Less: Variable Cost Per Unit \$12 Contribution Per Unit (a) \$12 Number of Units Sold (b) 950 units Total Contribution c = ( a x b) \$11400 Less: Fixed Cost \$9600 Profit \$1800 P/V Ratio = ( Contribution Per Unit / Sell Price Per Unit) 0.5

(1) Margin Of Safety Sales in Units = Total Profit / Contribution Per Unit = \$1800 / \$12 per Unit = 150 units

Margin Of Safety Sales In Amounts = Total Profit / P/v Ratio = \$1800/0.5 = \$3600

(2)

Margin Of Safety as Percentage Of Sales in Units = (150Units / 950 Units ) X 100 = 15.79%

Margin Of Safety as Percentage Of Sales in Amounts = ( \$3600 / \$22800 ) X 100 = 15.79%

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