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Warson Manufacturing sells a product for $1,200 per unit. Fixed costs are $32,000, while the variable...

Warson Manufacturing sells a product for $1,200 per unit. Fixed costs are $32,000, while the variable costs are $400 per unit. If the company has a 20% margin of safety, how many units were actually sold?

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Answer #1

>> Contribution margin per unit = $ 1,200 - $ 400 = $ 800.

>> Contribution margin = $ 800 / $ 1200 = 66.67 %.

>> Break even sales = Fixed cost / CM ratio

>> Break even sales = $ 32,000 / 66.67 %

>> Break even sales = $ 48,000.

>> Margin of safety % = Margin of safety / Actual sales.

>> 0.2 Actual sales = Margin of safty.

>> Margin of safet = Actual sales - Break even sales

>> 0.2 Actual sales = Actual sales - $ 48,000.

>> Actual Sales = $ 60,000.

>> Actual units = $ 60,000 / $ 1,200

>> Actual units = 50 Units.

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