Answer:
$37,500
Explanation:
In order to compute the margin of safety, first we have to determine the break even sales in dollars which is presented below:
Break even point = (Fixed expenses) ÷ (Profit volume Ratio)
where,
Contribution margin per unit = Selling price per unit - Variable expense per unit
= $15 - $9
= $6
And, Profit volume ratio = (Contribution margin per unit) ÷ (selling price per unit) × 100
So, the Profit volume ratio = ($6) ÷ ($15) × 100 = 40%
And, the fixed cost is $45,000
Now put these values to the above formula
So, the value would equal to
= ($45,000) ÷ (40%)
= $112,500
Now the margin of safety equals to
= Expected sales - break even sales
where,
Expected sales = Selling price per unit × Unit sales per month
= $15 × 10,000 units
= $150,000
And, the break even sales is $112,500
So, the margin of safety would be
= $150,000 - $112,500
= $37,500
