Answer:
Results are below.
Explanation:
<u>First, we need to calculate the break-even point in units and sales dollars:</u>
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 354,000 / (175 - 116)
Break-even point in units= 6,000
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 354,000 / (59 / 175)
Break-even point (dollars)= $1,050,000
<u>Now, the margin of safety and margin of safety rate:</u>
Margin of safety= (current sales level - break-even point)
Margin of safety= (10,000*175) - 1,050,000
Margin of safety= $700,000
Margin of safety ratio= (current sales level - break-even point)/current sales level
Margin of safety ratio= 700,000 / 1,750,000
Margin of safety ratio= 0.4= 40%
