Evergreen Corp. has provided the following data:
-The margin of safety percentage is:
A)45.0%
B)71.4%
C)55.0%
D)25.0%

Question

Evergreen Corp. has provided the following data: 
-The margin of safety percentage is:
A)45.0% 
B)71.4% 
C)55.0% 
D)25.0%

Quizplus · Accepted Answer

Variable expense per unit = $12 per unit + 0.05 F1F1F1S1F1F1F10 $40 per unit + 0.20 F1F1F1S1F1F1F10 $40 per unit
= $12 per unit + $2 per unit + $8 per unit = $22 per unit
CM ratio = Unit contribution margin F1F1F1S1F1F1F10 Unit selling price
= ($40 per unit - $22 per unit)F1F1F1S1F1F1F10 $40 per unit
= $18 per unit F1F1F1S1F1F1F10 $40 per unit = 0.45
Dollar sales to break even = Fixed expenses F1F1F1S1F1F1F10 CM ratio
= ($5,100 + $3,000)F1F1F1S1F1F1F10 0.45
= $8,100 F1F1F1S1F1F1F10 0.45
= $18,000
Margin of safety in dollars = Total actual sales - Break-even sales
= $40 per unit F1F1F1S1F1F1F10 1,000 units - $18,000
= $40,000 - $18,000 = $22,000
Margin of safety percentage = Margin of safety in dollars F1F1F1S1F1F1F10 Total actual sales
= $22,000 F1F1F1S1F1F1F10 $40,000 = 0.55

Evergreen Corp. Has Provided the Following Data