Question

During the current year, Mute Corporation expected to sell 22,700 telephone switches. Fixed costs for the year were expected to be $12,143,500, the unit sales price was budgeted at $3,350, and unit variable costs were budgeted at $1,480.
Mute's margin of safety (MOS) in sales dollars is: (Do not round intermediate calculations.)

Multiple Choice

$76,147,602.

$87,087,602.

$57,290,472.

$54,290,602.

$66,470,602.

Answer 1

The Mute's margin of safety (MOS) in sales dollars is: d. $54,290,602.

Margin of safety

First step

Breakeven=$12,143,500/( $3,350-$1,480)/$3,350

Breakeven=$12,143,500/$1870/$3370

Breakeven=$12,143,500/0.5548961424332

Breakeven=$21,884,275

Second step

Margin of safety:

Margin of safety=(22,700×$3350)-$21,884,275

Margin of safety=$54,290,602

The correct option is D.

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