Post: Describe the concept of margin of safety. Why is margin of safety a useful tool to calculate? How is it computed? How do we interpret the margin of safety ratio? When analyzing margin of safety, do we want a larger or smaller amount? Reply: Link this topic back to Peppy Pet. Explain to Josh the margin of safety computations from your CVP analysis. What does the margin of safety mean for him and his operations? Contribution Margin Calculations Exhibit 1: Peppy Pet Information Unit Information for Launch-Its Sales price per unit $ Variable costs per unit $ Units Sold in June 9.00 4.00 400 Unit Contribution Margin Contribution Margin Ratio $5.00 0.56 Breakeven Point Analysis Company Information Total fixed costs per month Target profit per month tas $ S 1,500.00 8,000.00 Breakeven Point in Units Breakeven Point in Revenue 300 $2,679 Target Net Income Analysis Peppy Pet CVP Income Statement For the month ending June 30 Required Sales in Units Required Sales in Dollars 1900 $ 16,964 Sales Revenue Less: Variable Costs Contribution Margin Less: Fixed Costs Operating Income Margin of Safety Analysis Total 3.600.00 1.600.00 2,000.00 1,500.00 500.00 $ $ $ $ $ Margin of Safety in Dollars Margin of Safety Ratio (9) S921 26%