Margin of safety Organic Health Care Products Inc. expects to maintain the same inventories at the end of 20YB as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during 20Y8. A summary report of these estimates is as follows: Estimated Variable Cost Estimated Fixed Cost (per unit sold) Production costs: Direct materials $ 8.00 Direct labor 3.00 Factory overhead $ 200,000 1.50 Selling expenses: Advertising 1,450,000 85 Sales salaries and commissions 93,000 Travel 340,000 Miscellaneous selling expense 2,000 0.10 Administrative expenses: Office and officers' salaries 300,000 10,000 Supplies 0.50 Administrative expenses: Office and officers' salaries 300,000 Supplies 0.50 10,000 Miscellaneous administrative expense 5,000 0.05 Total $2,400,000 $15.00 It is expected that 400,000 units will be sold at a price of $25 a unit. Maximum sales within the relevant range are 500,000 units. Determine the following based upon the estimates for 20YS: 1. Margin of safety for 20Y8 In units sold. 2. Margin of safety for 20Y8 in sales dollars. 3. Margin of safety for 20Y8 as a percentage of sales. % Feedback Check My Work 1. Subtract break-even unit sales from current unit sales 2. Subtract break-even sales dollars from current sales dollars. 3. Divide the margin of safety in dollars (or units) by current sales dollars (or units)