Question

Randolph Corporation sells a single product at a price of $275 per unit. Variable cost per unit is $135 and fixed costs total $356,860. If sales are expected to be $825,000, what is the company's margin of safety

Answer 1

Margin of Safety = $124,038

Step-by-step explanation:

Given:

Total Sale = $825,000

Sales price = $275 per unit

Variable cost per unit = $135

Fixed costs total = $356,860

Find:

Margin of Safety

Computation:

BEP Sale = FC / [(Sales per unit - VC) / Sales per unit]

BEP Sale = $700,962

Margin of Safety = Total Sale - BEP Sale

Margin of Safety = $825,000 - $700,962

Margin of Safety = $124,038