Evergreen Corp. has provided the following data: Sales per period 1,000 units Selling price $40 per unit Variable manufacturing cost $12 per unit Selling expenses$5,100 plus 5% of selling price Administrative expenses $3,000 plus 20% of selling price The margin of safety percentage is:

The correct answer is 55%.

Explanation:

According to the scenario, the computation of the given data are as follows:

Fixed cost = Selling expense + Administrative expense = $5,100 + $3,000

= $8,100

Now variable cost = 12 + (40× 5%) + (40 × 20%) = 12 + 2+ 8  

= $22

So, we can calculate the margin of safety by using following formula:

Margin of safety = Actual Sales - Breakeven Sales

Where, Breakeven sales = $8,100 ÷ (40 - 22) = 450 units

So,Margin of safety = 1,000 - 450 units = 550 units

So, Margin of safety percentage = 550 units ÷ 1,000 units

= 0.55 or 55%

is this a

answer; a large down payment,a longer term loan, would result in a lower monthly payment;