The Wildhorse Company sells sports decals that can be personalized with a player's name, a team...
Question:
The Wildhorse Company sells sports decals that can be personalized with a player's name, a team name, and a jersey number for $7.00 each. Wildhorse buys the decals from a supplier for $2.60 each and spends an additional $0.70 in variable operating costs per decal. The results of last month's operations are as follows:
| Sales revenue | $14,000 |
| Cost of goods sold | $5,200 |
| Gross profit | $8,800 |
| Operating expenses | $3,100 |
| Operating income | $5,700 |
1. Calculate contribution margin per unit.
2. What is Wildhorse's monthly breakeven point in units?
3. What is Wildhorse's margin of safety?
The margin of Safety:
The margin of safety can be defined as the extra goods sold by a company above the break-even point. The margin of safety can be calculated by deducting break-even point sales from total sales.
Answer and Explanation: 1
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The calculation for contribution margin per unit is shown below.
Contribution margin per unit = Selling price per unit - Cost of goods sold -...
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Margin of Safety in Accounting: Definition & Formula
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Chapter 2 / Lesson 10
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