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Margin of Safety Comer Company produces and sells strings of colorful indoor/outdoor lights for holiday display to retailers for $9.13 per string. The variable costs

Margin of Safety

Comer Company produces and sells strings of colorful indoor/outdoor lights for holiday display to retailers for $9.13 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 $308,018 per year. Administrative cost (all fixed) totals $220,274. Comer expects to sell 241,600 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.)

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