Question

The following monthly data are available for Vaughn Manufacturing. which produces only one product: Selling price per unit, $44; Unit variable expenses, $14; Total fixed expenses, $42000; Actual sales for the month of June, 6000 units. How much is the margin of safety for the company for June

Answer 1

Margin of safety = 4600 units

Step-by-step explanation:

given data

Selling price per unit = $44

Unit variable expenses = $14

Total fixed expenses = $42000

Actual sales June = 6000 units

solution

we get here break-even point in units that is express as

Break-even point = fixed costs ÷ contribution margin ..............1

put here value and we get

Break-even point =
`(42000)/(44-14)`

Break-even point = 1400 units

so now we can get here Margin of safety that is express as

Margin of safety = current unit sales - break-even point ........2

put here value and we get

Margin of safety = 6000 units - 1400 units

Margin of safety = 4600 units