he company considers renovating its operations by purchasing a new machine that would reduce variable expenses by $7.20 per unit. However, fixed expenses would increase to a total of $544,320 each month. Using the new machine would not cause a change in monthly sales quantity or price per unit. What would the company's margin of safety in dollars be if it purchases and uses the new machine

Question Completion:

Morton Corporation

Income Statement for the most recent month

Sales revenue (42,000 units * $24 per unit) $1,008,000

Variable cost of goods sold                                 705,600

Contribution margin                                          $302,400

Fixed expenses                                                    241,920

Net operating income                                         $60,480

Morton Corporation

The company's margin of safety in dollars would be $100,800 if it purchases and uses the new machine.

Explanation:

a) Data and Calculations:

Morton Corporation

Income Statement for the most recent month

Sales revenue (42,000 units * $24 per unit) $1,008,000

Variable cost                                                        705,600

Contribution margin                                          $302,400

Fixed expenses                                                    241,920

Net operating income                                         $60,480

After the renovation of operations:

Variable cost of goods sold will reduce by $7.20 per unit

Variable cost per unit before renovation = $16.80 ($705,600/42,000)

New Variable cost per unit after renovation = $9.60 ($16.80 - $7.20)

New contribution margin per unit = $14.40 ($24 - $9.60)

Contribution margin ratio = 0.60 or 60%

New total fixed expenses = $544,320

Break-even point in sales dollars = Fixed expenses/Contribution margin ratio

= $544,320/0.60

= $907,200

Margin of safety = Sales revenue - Break-even Sales Dollars

= $100,800 ($1,008,000 - $907,200)

answer; i believe that the correct answer );

was my answer wrong?