Answer:
$199,500
Explanation:
The computation of the margin of safety is shown below:
As we know that
margin of safety = Actual sales - break even sales
where,
Actual sales is
= Actual sales units × Selling price per unit
= 7,000 units × $38
= $266,000
And, the break even sales is
= Fixed cost ÷ contribution margin per unit
= $42,000 ÷ ($38 - $14)
= $42,000 ÷ $24
= 1,750 units
Now the break even sales is
= Break even units × selling price per unit
= 1,750 units × $38
= $66,500
So, the margin of safety is
= $266,000 - $66,500
= $199,500
