Answer:
Margin of safety= 105,313.43
Explanation:
Giving the following information:
Selling price per unit= $42
Unit variable expenses= $14
Total fixed expenses= $42,000
Actual sales for June= 4,000 units.
First, we need to calculate the break-even point in dollars:
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 42,000 / [(42 - 14)/42]
Break-even point (dollars)= 42,000/ 0.67
Break-even point (dollars)= $62,686.57
Now, we can determine the margin of safety in dollars:
Margin of safety= (current sales level - break-even point)
Margin of safety= (4,000*42) - 62,686.57
Margin of safety= 168,000 - 62,686.57
Margin of safety= 105,313.43
