Portland Antique Weaponry is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen, and collectors
He is currently producing 40 flintlock muskets per month. Data are as follows:
Sales price per unit $800
Variable cost per unit 470
Fixed costs per month 10,230
If Portland expects to sell 60 units per month, how much is his margin of safety expressed in sales revenue?
A) $13,630
B) $24,800
C) $23,200
D) $48,000
C .C)
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 = ($10,230 + 0 ) / $330 = 31 units
Expected sales - Breakeven sales = Margin of safety in units
60 units - 31 units = 29 units
Margin of safety in units x Sales price per unit = Margin of safety in dollars
29 units x $800 per unit = $23,200
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