Question

unistar computers makes and sells a unique computer that is designed for a specific market. cost information relating to that product is shown below: sales price $ 2,100 per unit variable costs $ 1,600 per unit fixed costs $ 150,000 total unistar expects to make and sell 420 computers. based on this information, the margin of safety expressed in units is:

Answer 1

To calculate the margin of safety in units, we first need to determine the break-even point in units. The break-even point is the point at which revenue equals costs. To find the break-even point in units, we can use the following formula:

Break-even point in units = Fixed costs / (Sales price - Variable costs)

Plugging in the given values, we get:

Break-even point in units = 150,000 / (2,100 - 1,600) = 150,000 / 500 = 300

So, the break-even point is 300 units.

The margin of safety is the difference between the expected sales and the break-even point. In this case, the expected sales are 420 units, so the margin of safety in units is:

Margin of safety in units = 420 - 300 = 120 units.