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Margin of Safety Ciganda Company produces and sells strings of colorful indoor/outdoor lights for holiday...

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Accounting

Margin of Safety

Ciganda Company produces and sells strings of colorful indoor/outdoor lights for holiday display to retailers for $15.64 per string. The variable costs per string are as follows:

Line Item Description Cost
Direct materials $2.90
Direct labor 1.70
Variable factory overhead 0.48
Variable selling expense 0.42

Fixed manufacturing cost totals $726,024 per year. Administrative cost (all fixed) totals $475,566. The company expects to sell 134,700 strings of light next year.

Required:

1. Calculate the break-even point in units. fill in the blank 1 of 1 units

2. Calculate the margin of safety in units. fill in the blank 1 of 1 units

3. Calculate the margin of safety in dollars. fill in the blank 1 of 1$

4. Conceptual Connection: Suppose Ciganda actually experiences a price decrease next year while all other costs and the number of units sold remain the same. Would this increase or decrease risk for the company? (Hint: Consider what would happen to the number of break-even units and to the margin of safety.)

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