Divine Foods produces a gourmet condiment that sells for $24 per unit
Variable cost is $6 per unit, and fixed costs are $8,000 per month. If Divine expects to sell 1,500 units, compute the margin of safety in units. (Round any intermediate calculations and your final answer to the nearest whole unit.)
A) 444 units
B) 1,056 units
C) 1,500 units
D) 19 units
B .B)
Sales price per unit $24
Less: Variable cost per unit (6 )
Contribution margin per unit $18
Breakeven sales in units = (Fixed costs + Target profit) / Contribution margin per unit
Breakeven sales in units = ($8,000 + 0 ) / $18 = 444 units
Expected sales - Breakeven sales = Margin of safety in units
1,500 units - 444 units = 1,056 units
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