Question

For Wilder Corporation, sales is $1,200,000 (6,000 units), fixed expenses are $360,000,

and the contribution margin per unit is $80. What is the margin of safety in dollars?
A) $60,000
B) $300,000
C) $540,000
D) $840,000

Answer 1

The margin of safety for Wilder Corporation is $300,000, which is the difference between actual sales and sales at the break-even point.

Step-by-step explanation:

To calculate the margin of safety in dollars for Wilder Corporation, we need to know the actual sales, the break-even point, and the contribution margin per unit. The break-even point in units can be found by dividing the fixed expenses by the contribution margin per unit. Here's how we calculate it:

1. Fixed expenses: $360,000
2. Contribution margin per unit: $80
3. Calculate the break-even point (BEP) in units: $360,000 / $80 = 4,500 units
4. Calculate break-even sales in dollars: 4,500 units x $200/unit (which is $1,200,000/6,000 units) = $900,000
5. Actual sales: $1,200,000
6. Calculate the margin of safety in dollars: $1,200,000 - $900,000 = $300,000

Therefore, the margin of safety for Wilder Corporation is $300,000.