Question

Globus Autos sells a single product. 8 comma 3008,300 units were sold resulting in $ 84 comma 000$84,000 of sales​ revenue, $ 24 comma 000$24,000 of variable​ costs, and $ 18 comma 000$18,000 of fixed costs. If Globus reduces the selling price by $ 1.10$1.10 per​ unit, the new margin of safety​ is: (Round any intermedary calculations to the nearest​ cent.)

Answer 1

$59,000

Step-by-step explanation:

We will first determine the variable cost per unit

= $24,000/300

= $80

Contribution margin percentage =

$280 - ($80 - $1.10)/$280

= 0.72

= 72%

New break even point = $18,000/72%

= 25,000

Old break even point =

($280 - $80)/280

= 0.71

= 71%

= $18,000/71%

= $25,352

Margin of safety = $84,000 - $25,000

= $59,000