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Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month's budget appear below:

Selling price $27 per unit

Variable expenses $16 per unit

Fixed expenses $8,910 per month

Unit sales 960 units per month

Requirement 1:

Compute the company's margin of safety. (Omit the "$" sign in your response.)

Margin of safety $

Requirement 2:

Compute the company's margin of safety as a percentage of its sales. (Round your answer to the nearest whole percent. Omit the "%" sign in your response.)

Margin of safety as a percentage of sales %

Margin of safety = $4,050

Margin of safety as a percentage of sales % = 15.625

Explanation:

Requirement 1:

Selling Price = 27

Variable cost = 16

Contribution per unit = $27 - $16

= $11

Fixed cost = $8,910

Break even sales:

= (Fixed cost : Contribution per unit) : Selling price per unit

= (8,910 : 11) * 27

= 21,870

Expected Sales = Units sold per month * Selling price per unit

= 960 * 27

= 25,920

Margin of safety = Expected Sales - Break even sales

= 25,920 - 21,870

= 4,050

Margin of safety = $4,050

Requirement 2:

Margin of safety ratio = (Margin of Safety : Expected sales) * 100

= (4,050 : 25,920) * 100

= 15.625

Margin of safety as a percentage of sales % = 15.625