Margin of Safety Head-First Company plans to sell 4,770 bicycle helmets at $70 e
ID: 2510350 • Letter: M
Question
Margin of Safety
Head-First Company plans to sell 4,770 bicycle helmets at $70 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense). Break-even units equal 1,980.
Required:
1. Calculate the margin of safety in terms of the number of units.
units
2. Calculate the margin of safety in terms of sales revenue.
$
Explanation / Answer
margin of safety=Total sales-Breakeven units
=(4770-1980)=2790 units.
=(2790*$70)=$195300.