Question

The following monthly data are available for Crane Company. which produces only one product: Selling price per unit, $38; Unit variable expenses, $14; Total fixed expenses, $42000; Actual sales for the month of June, 2000 units. How much is the margin of safety for the company for June?

Answer 1

Answer:

Margin of safety= 250 units

Explanation:

Giving the following information:

Selling price per unit, $38; Unit variable expenses, $14; Total fixed expenses, $42000; Actual sales for the month of June, 2000 units.

First, we need to calculate the break-even point in units.

Break-even point= fixed costs/ contribution margin

Break-even point= 42,000/(38-14)= 1,750 units

Margin of safety= current unit sales - break-even point= 2,000 - 1,750= 250 units