ACCA PM · Chapter 5 · Question 10 of 10
A single-product company sells its product for $45 with variable cost of $27 per unit. Fixed costs are $108,000 and budgeted sales are 7,500 units. What is the margin of safety as a percentage of budgeted sales?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) 20%
Explanation
Contribution per unit = $45 - $27 = $18. Breakeven = $108,000 / $18 = 6,000 units. Margin of safety = (7,500 - 6,000) / 7,500 = 20%.
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