For Wilder Corporation, sales is $1,600,000 (8,000 units), fixed expenses are $480,000, and the contribution margin per unit is $80. What is the margin of safety in dollars?
A) $80,000
B) $400,000
C) $720,000
D) $1,120,000

Question

Quizplus · Accepted Answer

Margin of safety = Total Sales - Breakeven Sales
Breakeven Sales = Fixed Expenses / Contribution Margin per Unit
Breakeven Sales = $480,000 / $80 = 6,000 units
Breakeven Sales in dollars = 6,000 units x $80 per unit = $480,000
Margin of safety = $1,600,000 - $480,000 = $1,120,000
Therefore, the margin of safety in dollars is $1,120,000, which corresponds to option D. However, none of the options match the correct answer. Option B is the closest answer, as it is the only option that is in the same order of magnitude as the margin of safety calculated.

For Wilder Corporation, Sales Is $1,600,000 (8,000 Units), Fixed Expenses