Margin of Safety

Chillmax Company plans to sell 3,500 pairs of shoes at $60 each in the coming year. Unit variable cost is $21 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $78,000 (includes fixed factory overhead and fixed selling and administrative expense). Break-even units equal 2,000.

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.