(Answered) Question margin of safety yuan company produces and sells

Accounting

Question: Margin of Safety Yuan Company produces and sells strings of colorful indoor/outdoor lights for holiday display to retailers for $8.42 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 expenses 0.42

Fixed manufacturing cost totals $245,650 per year. Administrative cost (all fixed) totals $301,505. Yuan expects to sell 225,000 strings of light next year.

Required: 1. Calculate the break-even point in units.

2. Calculate the margin of safety in units.

3. Calculate the margin of safety in dollars.

4. Conceptual Connection: Suppose Yuan 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?

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