Vintage Weaponry is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen, and collectors. He is currently producing 80 flintlock muskets per month. Data are as follows: Sales price per unit$720Variable cost per unit$700Fixed costs per month$600 If Vintage expects to sell 50 units per month, how much is his margin of safety expressed in sales revenue?

CVP analysis is considered as a decision-making tool that helps management to make strategies and take wise decisions. It includes an analysis of contribution margin, Break-even point, Margin of safety, etc.Margin of safety = Actual sales - Break-even sales Actual sales = Units * Sale price = 50 * 720 = 36,000 Break even sales = Fixed cost / Contribution margin ratio Contribution margin ratio = ( 720 - 700 ) / 720 = 2.7778 % Break even sales = 600 / 2.7778 % = 21,600 Margin of safety =36,000 - 21,600 = 14,400

Answered: Vintage Weaponry is owned and operated…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Vintage Weaponry is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen, and collectors. He is currently producing 80 flintlock muskets per month. Data are as follows:

Sales price per unit	$720
Variable cost per unit	$700
Fixed costs per month	$600

If Vintage expects to sell 50 units per month, how much is his margin of safety expressed in sales revenue?

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