Answer:
Margin of safety= $9,000
Explanation:
<u>First, we need to calculate the selling price and unitary variable cost:</u>
Selling price= 150,000 / 5,000= $30
Unitary varaible cost= 112,500 / 5,000= $22.5
<u>Now, we need to determine the break-even point in dollars:</u>
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 35,250 / [(30 - 22.5) / 30]
Break-even point (dollars)= 35,250 / 0.25
Break-even point (dollars)= $141,000
<u>Finally, the margin of safety in dollars:</u>
Margin of safety= (current sales level - break-even point)
Margin of safety= 150,000 - 141,000
Margin of safety= $9,000
