Question

Vintage Weaponry is owned and operated by a craftsman who makes replicas of historic firearms for​ museums, sportsmen, and collectors. He is currently producing 40 flintlock muskets per month. Data are as​ follows: Sales price per unit $ 900 Variable cost per unit 700 Fixed costs per month 4 comma 800 If Vintage expects to sell 60 units per​ month, how much is his margin of safety expressed in sales​ revenue?

Answer 1

Margin of safety= $32,181.82

Step-by-step explanation:

Giving the following information:

Sales price per unit $900

Variable cost per unit $700

Fixed costs per month $4,800

Vintage expects to sell 60 units per​ month

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

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 4,800 / [(900 - 700) / 900]

Break-even point (dollars)= 4,800/0.22

Break-even point (dollars)=$21,818.18

Now, we can calculate the margin of safety in dollars:

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

Margin of safety= (60*900) - 21,818.18

Margin of safety= 54,000 - 21,818.18

Margin of safety= $32,181.82