Theodora Patel makes stuffed teddy bears. Recent information for her business follows: Selling...
Question:
Theodora Patel makes stuffed teddy bears. Recent information for her business follows:
Selling price per bear $25.00
Total fixed cost per month 1,500.00
Variable cost per bear 15.00
1. If she sells 275 bears next month, determine the margin of safety in number of units, sales dollars, and percentage of sales. (Round your answers to 1 decimal place. Omit the "$" & "%" signs in your response.)
Margin of Safety:
The term, margin of safety, is defined as the difference between the actual sales and break even sales. It indicates the level of sales before the business reaches its break even sales. The company must therefore monitor the level of margin of safety to avoid incurring losses.
Answer and Explanation: 1
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View this answerTo determine the margin of safety, we must first determine the break even sales.
Break even sales in units = Fixed cost/ (Selling price per bear -...
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Margin of Safety in Accounting: Definition & Formula
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