Mississippi Mile Travel Company is conducting a sensitivity analysis in order to assess the company's margin of safety in units and in dollars. Predicted data indicate that 4,900 travel package sales can be expected while 2,000 package sales are necessary to meet the company's breakeven point. Each travel package sells for $2,700. Calculate the company's margin of safety in package units and dollars.

2,900 units; $7,830,000

Explanation:

Given that,

Total sales = 4,900

Break-even sales  = 2,000

Selling price of each package = $2,700

The margin of safety is defined as the amount of the total sales that are above the break even point.

Margin of safety in units:

= Total sales – Break-even sales

= 4,900 – 2,000

= 2,900 units

Margin of safety in dollars:

= Margin of safety in units × Selling price of each package

= 2,900 units × $2,700

= $7,830,000

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