Question

The following monthly data are available for Bonita Industries. which produces only one product: Selling price per unit, $42; Unit variable expenses, $14; Total fixed expenses, $42000; Actual sales for the month of June, 5000 units. How much is the margin of safety for the company for June

Answer 1

70%

Step-by-step explanation:

Margin of safety is the amount of sales a company makes in excess of the breakeven point

Margin of safety = (actual sales - break-even sales) / actual sales

Breakeven quantity are the number of units produced and sold at which net income is zero

Breakeven quantity = fixed cost / price – variable cost per unit /

$42000 / (42 -14) = 1500

(5000 - 1500) / 5000 = 70%