Question

Staley Co. manufactures computer monitors. The following is a summary of its basic cost and revenue data: Per Unit Percent Sales price $525 100 Variable costs 300 57 Unit contribution margin $225 43 Assume that Staley Co. is currently selling 500 computer monitors per month and monthly fixed costs are $75,000. Staley Co.'s margin of safety ratio (MOS%) if 500 units are sold would be (round intermediate calculation up to nearest whole number of units): Group of answer choices 33.2%. 20.5%. 17.7%. 19.5%. 23.7%.

Answer 1

Answer:

36%

Explanation:

Calculation for what Staley Co.'s margin of safety ratio (MOS%) if 500 units are sold would be

First step is to calculate the Break even point units using this formula

Break even point units =( Fixed cost / Contribution margin per unit)

Let plug in the formula

Break even point units= ($75,000 / $225)

Break even point units= 320 units

Second step is to calculate the Margin of safety sales in units using this formula

Margin of safety sales in units = Actual sales units - Break even sales units

Let plug in the formula

Margin of safety sales in units = 500 - 320

Margin of safety sales in units= 180

Now let calculate Margin of safety ratio using this formula

Margin of safety ratio = ( margin of safety units / Actual sales units) *100

Let plug in the formula

Margin of safety ratio= (180 / 500 ) *100

Margin of safety ratio= 36%

Therefore Staley Co.'s margin of safety ratio (MOS%) if 500 units are sold would be 36%