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Problem - Margin of Safety Head-First Company plans to sell 4,830 bicycle helmets at $74 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 1,707.
Required -
1. Calculate the margin of safety in terms of the number of units.
2. Calculate the margin of safety in terms of sales revenue.
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Susan is a managerial accountant for Bay City tires, Inc. Should Susan present the manager's proposal to the Board of Directors? Why or why not?
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