Wang Co. manufactures and sells a single product that sells for $250 per unit; variable costs are $145 per unit. Annual fixed costs are $873,600. Current sales volume is $4,280,000. Compute the current margin of safety in dollars.

Wang Co. manufactures and sells a single product that sells for $250 per unit; variable costs are $145 per unit. Annual fixed costs are $873,600. Current sales volume is $4,280,000.

First, we need to calculate the break-even point in dollars:

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 873,600/ [(250 - 145)/250]

Break-even point (dollars)= 873,600/0.42

Break-even point (dollars)= $2,080,000

Now, we can calculate the margin of safety:

Margin of safety= (current sales level - break-even point)

Margin of safety= 4,280,000 - 2,080,000= $2,200,000