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Units sold 1,180 Price $ 10 Sales $ 11,800 Variable manufacturing costs 4,720 Fixed manufacturing costs 2,360 Variable selling costs 1,180 Fixed administrative costs 1,180 Required: Using the data provided, compute the...

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Question

Accounting

Units sold1,180
Price$10
Sales$11,800
Variable manufacturing costs4,720
Fixed manufacturing costs2,360
Variable selling costs1,180
Fixed administrative costs1,180

Required:

Using the data provided, compute the margin of safety and marginof safety ratio.

mos:

mos ratio:

Answer & Explanation Solved by verified expert
4.1 Ratings (707 Votes)

Margin of Saftey = Total Sales - Break Even Sales
=$ 11,800 -$ 7080
Margin of Saftey = $4,720
Working Notes
Sales                    11,800
less : Variable costs
Manufacturing costs                       4,720
Selling Costs                       1,180                      5,900
Contribution Margin                      5,900
Contribution Margin Ratio Contribution Margin / Sales *100
= $ 5900 / $ 11800 *100
=50%
Fixed Costs :
Fixed Manufacturing costs $ 2360
Fixed Admnistrative costs $ 1180
Total Fixed Costs $ 3540
Break even sales Fixed Cost / Contribution margn ratio
=$ 3540 / 50%
=$7080
margin of safety ratio =Total Sales - Break Even Sales/Total Sale
=$4,720/$11,800*100
40%

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