Question

For Sheffield Corp., sales is $1660000 (8300 units), fixed expenses are $480000, and the contribution margin per unit is $80. What is the margin of safety in dollars

Answer 1

$460,000

Explanation:

The computation of the margin of safety in dollars is shown below:-

Break even sales = fixed cost ÷ contribution per unit

= $480,000 ÷ $80

= 6,000 units

The Margin of safety in dollars = Total sales - Break even sales

= 8,300 - 6,000

= 2,300

sale price = $1660000 ÷ 8,300

= $200 per unit

margin of safety in dollars = 2,300 × $200

= $460,000