Question

Antique Works is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen, and collectors. The data are as follows:

Sales price per unit $800
Variable cost per unit 470
Fixed costs per month 8,580
If Antique expects to sell 40 units per month, what is his margin of safety expressed in units per month?

Select one:

A. 14 units

B. 40 units

C. 12 units

D. 66 units

Answer 1

A. 14 units

Step-by-step explanation:

Contribution Per unit = Sales price – variable cost per unit

= $800 - $470

= $330

Break Even sales in units = Fixed Cost / Contribution per unit

= $8,580/$330

= 26 units

Margin of Safety = Total sales units - Break even sales in units

= 40 units - 26 units

= 14 units

Therefore, if Antique expects to sell 40 units per month, his margin of safety expressed in units per month is 14 units.