sagnik2422
Feb 1, 2015, 10:55 AM
slo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):
Sales
$
22,100
Variable expenses
12,700
Contribution margin
9,400
Fixed expenses
7,708
Net operating income
$
1,692
Question : What is the margin of safety in dollars?
MY WORK : I took the sales of $22,100 and I subtracted the break even sales at 820 units (break even point in unit sales which was marked correct for me) of $18,124 ( break even dollar sales which was marked correct for me) and I got $3976 which was marked wrong. I tried rounding up to $3980 but this was marked incorrect. I want to also say that I got the margin of safety percentage correct which I obtained by taking 3976 and dividing it by 22,100 sales to get 18%.
Sales
$
22,100
Variable expenses
12,700
Contribution margin
9,400
Fixed expenses
7,708
Net operating income
$
1,692
Question : What is the margin of safety in dollars?
MY WORK : I took the sales of $22,100 and I subtracted the break even sales at 820 units (break even point in unit sales which was marked correct for me) of $18,124 ( break even dollar sales which was marked correct for me) and I got $3976 which was marked wrong. I tried rounding up to $3980 but this was marked incorrect. I want to also say that I got the margin of safety percentage correct which I obtained by taking 3976 and dividing it by 22,100 sales to get 18%.