Post: Describe the concept of margin of safety. Why is margin of safety a useful tool...

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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? Exhibit 1: Peppy Pet Information Contribution Margin Calculations Unit Information for Launch-Its Unit Contribution Margin Contribution Margin Ratio $5.00 0.56 Sales price per unit 9.00 Variable costs per unit Units Sold in June 4.00 400 Breakeven Point Analysis Company Information Total fixed costs per month Breakeven Point in Units Breakeven Point in Revenue 1,500.00 300 Target profit per month 8,000.00 $2,679 Peppy Pet CVP Income Statement Target Net Income Analysis Required Sales in Units Required Sales in Dollars 1900 $16,964 For the month ending June 30 Total Sales Revenue 3,600.00 1,600.00 Margin of Safety Analysis Less. Variable Costs Contribution Margin 2,000.00 Margin of Safety in Dollars Margin of Safety Ratio (%) 1.500.00 $921 Less: Fixed Costs Operating Income 500 00 26% 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? Exhibit 1: Peppy Pet Information Contribution Margin Calculations Unit Information for Launch-Its Unit Contribution Margin Contribution Margin Ratio $5.00 0.56 Sales price per unit 9.00 Variable costs per unit Units Sold in June 4.00 400 Breakeven Point Analysis Company Information Total fixed costs per month Breakeven Point in Units Breakeven Point in Revenue 1,500.00 300 Target profit per month 8,000.00 $2,679 Peppy Pet CVP Income Statement Target Net Income Analysis Required Sales in Units Required Sales in Dollars 1900 $16,964 For the month ending June 30 Total Sales Revenue 3,600.00 1,600.00 Margin of Safety Analysis Less. Variable Costs Contribution Margin 2,000.00 Margin of Safety in Dollars Margin of Safety Ratio (%) 1.500.00 $921 Less: Fixed Costs Operating Income 500 00 26%

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Concept of Margin of Safety Margin of Safety is the sales point immediately after breakeven point which ensures profits to the entity From Breakeven A... View the full answer