23 May EXPLAIN WHAT IS MARGIN OF SAFETY
Harvey Nichols sells wedding dresses. The cost of each dress is comprised of the following: Selling price of $2,000 and variable (flexible) costs of $800. Total fixed (capacity-related) costs for Harvey Nichols are $180,000.
REQUIREMENT:
a.What is the contribution margin per dress?
b. What is Harvey Nichols’s total profit when 200 dresses are sold, prepare a CVP income statement using the contribution margin format.
c.How many dresses must Harvey Nichols’s sell to reach the breakeven point?
d. Suppose that Harvey Nichols wants to achieve $120,000 profit at the end of the year, how many dresses Harvey Nichols must sell.
e. Calculate the margin of safety (in number of class).
f. Explain what is margin of safety
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