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Selling price per unit = $60; total absorption costs per unit = $50; marginal cost per unit =
$40. Budgeted production = 1,500 units
What is the margin of safety?
A! 1,000 units; 50%
B! 1,000 units; 33.3%
C! 500 units; 50%
D! 500 units; 33.3% Answer: Contribution per unit = $60 – $40 = $20.
Fixed costs per unit = $50 – $40 = $10. Budgeted fixed costs = $10 x 2,000 = $20,000.
BEP = 20,000/20 = 1,000 units.
So, output could fall from budgeted 1,500 to 1,000 and just break even.
Margin of safety = 500/1,500 = 33.3%…………………….is this correct [Budgeted fixed fixed costs=$10 x 2000=$20000]Fixed costs absorbed per unit = 50 – 40 = 10
Budgeted output = 1,500 units (don’t know where your 2,000 units came from)
So, budgeted fixed costs = 10 x 1,500 = 15,000
BEP = 15,000/(60 – 40) = 750
MoS = (1,500 – 750)/1,500 = 50%
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