Question

Susy sells authentic Amish quilts on her website. Suppose Susy expects to sell 1 comma 200 quilts during the coming year. Her average sales price per quilt is $ 275​, and her average cost per quilt is $ 175. Her fixed expenses total $ 60 comma 000. Compute her margin of safety

Answer 1

Margin of safety= 600 units

Step-by-step explanation:

Giving the following information:

Suppose Susy expects to sell 1,200 quilts during the coming year. Her average sales price per quilt is $ 275​, and her average cost per quilt is $ 175. Her fixed expenses total $60,000.

First, we need to calculate the break-even point in units:

Break-even point= fixed costs/ contribution margin

Break-even point= 60,000/ (275 - 175)

Break-even point= 600 units

Now, we can calculate the margin of safety:

Margin of safety= (current sales level - break-even point)

Margin of safety= 1,200 - 600= 600 units