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 \$ 25 Variable expense per unit \$ 19 Fixed expense per month \$ 4,860 Unit sales per month 960

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).)

#### Homework Answers

Answer #1

1.

 Break even point in units = Fixed expenses / Contribution margin Break even point in units = \$4,860 / (\$25-\$19) Break even point in units = 810 Units
 Margin of safety = Actual Sales - Break even point Margin of safety = (960*\$25) - (810*\$25) Margin of safety = \$3,750

2.

 margin of safety as a percentage of its sales = Margin of safety / Actual sales margin of safety as a percentage of its sales = \$3,750 / (960*\$25) margin of safety as a percentage of its sales = 15.63%

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