Question

Cubie Corporation has provided the following data concerning its only product: Selling price $ 105 per unit Current sales 12,300 units Break-even sales 8,610 units What is the margin of safety in dollars

Answer 1

Answer:

The correct answer is $387,450.

Explanation:

According to the scenario, the given data are as follows:

Selling price = $105 / unit

Current sales = 12,300 units

So, current sales value = 12,300 × $105 = $1,291,500

Break-even sales =  8,610 units

So, Break-even sales value =  8,610 ×$105 = $904,050

So, we can calculate the margin of safety by using following formula:        

Margin of safety = Current sales value - Break even sales value

= $1,291,500 - $904,050

= $387,450

Hence, the margin of safety is $387,450.