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 \$ 26 Variable expense per unit \$ 18 Fixed expense per month \$ 6,960 Unit sales per month 1,020 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. 0.1234 should be entered as 12.34).)

Income statement

 Sales(1020×\$26) \$26520 (-) variable expenses(1020×\$18) (\$18360) Contribution margin \$8160 (-) fixed expenses (\$6960) Net operating income \$1200

P/v ratio /contribution margin ratio= contribution margin/sales×100

= \$8160/\$26520×100

= 30.77%

1)Margin of safety = profit/p/v ratio

= \$1200/30.77%

= \$3899.90

2) margin of safety as a percentage of sales

= \$3899.90/\$26520×100

= 14.70%

ALL THE BEST

THANK YOU

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