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20 November, 09:18

Hyde's Headphones sells deluxe headphones for $90 each. Unit variable expenses total $70. The breakeven sales in units is 1000 and budgeted sales in units is 4620. What is the margin of safety in dollars?

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  1. 20 November, 09:22
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    0.7835 or 78.35%

    Explanation:

    Budgeted Sales = $90 per unit x 4620 units = $415,800

    Break-Even Sales (Revenue) = 1000 units x $90 per unit = $90,000 units

    Margin of safety = (Budgeted Sales - Break-Even Sales) : Budgeted Sales

    Margin of Safety = ($415,800 - $90,000) : $415,800 = 0.7835 or 78.35%
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