Head-First Company plans to sell 5,180 bicycle helmets at $72 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense). Break-even units equal 1,833. Required: 1. Calculate the margin of safety in terms of the number of units. units 2. Calculate the margin of safety in terms of sales revenue.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Margin of Safety
Head-First Company plans to sell 5,180 bicycle helmets at $72 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory
overhead, and variable selling expense). Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense). Break-even units
equal 1,833.
Required:
1. Calculate the margin of safety in terms of the number of units.
units
2. Calculate the margin of safety in terms of sales revenue.
Transcribed Image Text:Margin of Safety Head-First Company plans to sell 5,180 bicycle helmets at $72 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense). Break-even units equal 1,833. Required: 1. Calculate the margin of safety in terms of the number of units. units 2. Calculate the margin of safety in terms of sales revenue.
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