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    Question

    A company manufactures a single product for which cost and selling price data are as follows:

    Selling price per unit - Rs. 12

    Variable cost per unit - Rs. 8

    Fixed cost for a period - Rs. 98,000

    Budgeted sales for a period - 30,000 units

    The margin of safety, expressed as a percentage of budgeted sales is close to:

    A 20% Correct Answer Incorrect Answer
    B 25% Correct Answer Incorrect Answer
    C 73% Correct Answer Incorrect Answer
    D 125% Correct Answer Incorrect Answer
    E none of these Correct Answer Incorrect Answer

    Solution

    Sales – VC = contribution 12-8 = 4 rs per unit Contribution 30,000*4 = 1,20,000 Less FC: (98,000) Profit:  22,000 MOS Units:  22000/4 = 5500 units MOS as % of budgeted units = 5500 / 30000 * 100 18.33%.

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