Antique Works is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen, and collectors
The data are as follows:
Sales price per unit $800
Variable cost per unit 470
Fixed costs per month 8,580
If Antique expects to sell 40 units per month, what is his margin of safety expressed in units per month?
A) 14 units
B) 40 units
C) 66 units
D) 12 units
A .A)
Sales price per unit $800
Less: Variable cost per unit (470 )
Contribution margin per unit $330
Breakeven sales in units = (Fixed costs + Target profit) / Contribution margin per unit
Breakeven sales in units = ($8,580 + 0 ) / $330 = 26 units
Expected sales - Breakeven sales = Margin of safety in units
40 units - 26 units = 14 units
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