Question

Cubie Corporation has provided the following data concerning its only product: Selling price $ 106 per unit Current sales 11,000 units Break-even sales 9,240 units What is the margin of safety in dollars

Answer 1

Answer:

The margin of safety in dollars is $186560

Explanation:

The margin of safety is value of sales or sales in units that are in excess of the break even sales or units. The break even point is where the firm is neither making a profit nor a loss and its total revenue is equal to its total expenses.

The margin of safety can be calculated by deducting the break even sales value from the budgeted/actual sales value.

Margin of safety in dollars = budgeted/actual sales value - break even sales value

Margin of safety in dollars = (106 * 11000) - (106 * 9240) = $186560