A-LevelAccountingTraditional costing methods9706/12 · May/June 2018 · Q271 Mark

A business produces a single product. The following information is available for a month. budgeted sales quantity 200 units selling price per unit $40 variable cost per unit $24 budgeted monthly fixed costs $800 The business plans to rent a machine which will increase monthly fixed costs by $1200 to $2000 and reduce variable costs to $20 per unit. What would be the effect of this on the margin of safety?

Adecrease by 50 units

Bdecrease by 90 units

Cincrease by 50 units

Dincrease by 90 units

✓ Correct answer

A: decrease by 50 units

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Topic: Traditional costing methods, A-Level Accounting (syllabus 9706). Multiple choice, 1 mark.
Source: A-Level Accounting, May/June 2018 Paper 1 Variant 2, question 27.

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