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A company makes a single product which sells for $20 per unit
Fixed cost are $100000 per month
sales contribution ratio is 25%sales revenue is $525000…what is the margin of safety in units ???
I have tried and Im getting frustrated…Thanks
If the sales revenue is 525,000 then it means that they are selling 525,000/20 = 26,250 units.
The contribution per unit is 25% x $20 = $5.
For breakeven, the total contribution must be equal to the fixed costs of $100,000. So breakeven units is 100,000/5 = 20,000 units.So the margin of safety in units = 26,250 – 20,000 = 6,250 units.
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