Question

Berkut company's variable cost per unit was $25 and a total fixed cost was $300,000. Assuming...

Berkut company's variable cost per unit was $25 and a total fixed cost was $300,000. Assuming the company sells its product for $50 per unit, what is its margin of safety if sales total $800,000
a. 16,000 units
b. 25%
c. 12000 units
d. 1000 units

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Answer #1

Correct answer--- b. 25%

A

Sales price

$             50.00

B

Variable cost per unit

$             25.00

C=A-B

Contribution per unit

$             25.00

D

Fixed cost

$ 3,00,000.00

E=D/C

Breakeven Sales in units

              12,000

F= E x 50

Breakeven Sales in Dollars

$ 6,00,000.00

G

Actual sales

$ 8,00,000.00

H=G-F

Margin of Safety in Dollars

$ 2,00,000.00

I=H/50

Margin of Safety in Units

4000

J=H/G

Margin of safety percentage

25%
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