Margin of Safety Comer Company produces and sells strings of colorful indoor/outdoor lights for holiday display to retailers for $11.76 per string. The variable costs per string are as follows: Direct materials $1.87 Direct labor 1.70 Variable factory overhead 0.57 Variable selling expense 0.42 Fixed manufacturing cost totals $540,000 per year. Administrative cost (all fixed) totals $385,200. Comer expects to sell 238,100 strings of light next year. Required: 1. Calculate the break-even point in units. units 2. Calculate the margin of safety in units. units 3. Calculate the margin of safety in dollars. 4. Conceptual Connection: Suppose Comer actually experiences a price decrease next year while all other costs and the number of units sold remain the same. Would this increase or decrease risk for the company? (Hint: Consider what would happen to the number of break-even units and to the margin of safety.) Increase Feedback Check My Work 1. Break-Even Units = Fixed Cost / Contribution Margin per Unit The margin of safety is the units sold or the revenue earned above the break-even volume. 2. Margin of Safety in Units = Sales in Units - Break-Even Units 3. Margin of Safety in Sales Revenue = Sales - Break-Even Sales Review the "How to Calculate the Break-Even Point in Units" and "How to Calculate the Margin of Safety" examples in your text