Question

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 | $ | 27 |

Variable expense per unit | $ | 13 |

Fixed expense per month | $ | 11,480 |

Unit sales per month | 970 | |

**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).)**

Answer #1

Selling price per unit = $27

Variable expense per unit = $13

Fixed expense per month = $11,480

Contribution margin per unit = Selling price per unit - Variable expense per unit

= 27-13

= $14

Contribution margin ratio = Contribution margin per unit/ Selling price per unit

= 14/27

= 51.8518519%

Break even point ( Sales dollars) = Fixed cost/ Contribution margin ratio

= 11,480/51.8518519%

= $22,140

1.

Actual sales = Number of units sold x Selling price per unit

= 970 x 27

= $26,190

Margin of safety = Actual sales - Break even sales

= 26,190-22,140

= $4,050

2.

Margin of safety (%) = Margin of safety / Actual sales

= 4,050/26,190

= 15.46%

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Molander Corporation is a distributor of a sun umbrella used at
resort hotels. Data concerning the next month’s budget appear
below:
Selling price
$29
per unit
Variable expenses
$13
per unit
Fixed expenses
$13,120
per month
Unit sales
970
units per month
Required:
1.
Compute the company’s margin of safety.
2.
Compute the company’s margin of safety as a percentage of its
sales. Round your percentage answer to 2 decimal places
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Variable expense per unit
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Variable expense per unit
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Variable expense per unit
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1. What is the company’s margin of safety? (Do not round
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2. What is the company’s margin of safety as a percentage of its
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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...

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