Question

In 2018 Duck Inc. sold rain boots for $50 per pair and the firm had fixed costs of $312,000, variable costs of $24 per pair, and total sales of $925,000. What is the margin of safety for 2018?

Answer 1

$325,000

Step-by-step explanation:

he margin of safety is the difference between the desired sale volume and the breakeven point.

The margin of safety = current sales revenue- breakeven point

current sale sales

using CVP analysis breakeven sales = fixed costs/ contribution margin per unit

Contribution margin per unit = selling price- variable cost

=$50 -$24 =$26

Break-even point = $312,000/$26 = 12,000 units

breakeven in dollar value = $12,000 x $50 = $600,000.00

The margin of safety = $925,000 - $600,000

=$325,000