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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

reducing the scale of the market for a new product.