Question

The Robinson Lawn Chair Company produces and sells a single high-priced lawn chair and in fiscal...

The Robinson Lawn Chair Company produces and sells a single high-priced lawn chair and in fiscal 1999 the company produced and sold 60,000 units. The 1999 income statement of the company reported the following:

Robinson Lawn Chair Company Income Statement For Fiscal Year 1999

Total $’s

Per Unit

Sales

1,800,000

30

Variable Costs

1,350,000

22.5

Contribution Margin

450,000

7.5

Fixed Costs

240,000

4

Income before Taxes

210,000

3.5

Tax Expense

63,000

1.05

Income After Taxes

147,000

2.45

1-      Determine the company's margin of safety in units for fiscal 1999.

a.

28,000 units
b.

21,000 units
c.

14,000 units
d.

7,000 units
Business   Accounting   
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Answer #1
The company's Margin of safety in units for fiscal year 1999 is a)28000 units
Margin of safety(Units) =Current sale units-Breakeven sales units
Margin of safety(Units) =60,000-32,000= 28,000 units
Break-even point in Unit sales
Contribution per unit= $7.5
Fixed cost= $2,40,000
Break-even point =Fixed cost/Contribution Ratio= $2,40,000/$7.5= 32,000 units
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