Exercise 5-8 Compute the Margin of Safety [LO5-7] Molander Corporation is a dist
ID: 2333890 • Letter: E
Question
Exercise 5-8 Compute the Margin of Safety [LO5-7]
Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month’s budget appear below:
Required:
1. What is the company’s margin of safety? (Do not round intermediate calculations.)
2. What is the company’s margin of safety as a percentage of its sales? (Round your percentage answer to 2 decimal places (i.e. .1234 should be entered as 12.34).)
Need Help with this question please! I followed another chegg solution and it was wrong.
Explanation / Answer
Contribution margin=Selling price-Variable expenses
=(28-18)=$10/unit
Hence breakeven point=Fixed expenses/Contribution margin
=(8400/10)=840 units
1.Margin of safety=Total sales-Breakeven sales
=(990-840)=150 units
=(150*$28)=$4200
2.MOS%=Margin of safety/Total sales
=(150/990)=15.15%(Approx).