A company has a margin of safety of 25%, a contribution margin ratio of 30%, and sales of $1,000,000.a. What is the break-even point in sales dollars?$b. What is the operating income?$c. If neither the relationship between variable costs and sales nor the amount of fixed costs is expected to change in the next year,how much additional operating income can be earned by increasing sales by $110,000?

The margin of safety provides a measure of the financial resilience of a business, as it indicates…

Answered: A company has a margin of safety of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Which of the following is true regarding the contribution margin ratio of a company that produces onlya single producct? Select one: O a. As fixed expenses decrease, the contribution margin ratio is unaffected. Ob.The contribution margin ratio equals the selling price per unit less the variable expense ratio. O c The contribution margin ratio divided by the selling price per unit equals the contribution margin per unit. Od. None of the given answer is correct. Oe. The contribution margin ratio will decline as unit sales decline.
If Mazoon Company sells unit outputs that exceed the breakeven point there will be a profit .a O total sales revenue will exceed total variable costs b O None of the given answers .c O there will be an increase in total fixed costs .d O total sales revenue will exceed total fixed costs .e O
All else being equal, a $10.00 increase in a product's variable expense per unit accompanied by a $10.00 increase in its selling price per unit will: Select one: a. have no effect on the contribution margin ratio. b. None of the given answers. c. increase the break-even volume. d. decrease the total contribution margin. e. decrease the degree of operating leverage. O
Which of the following equations is true? Multiple Choice Dollar sales for company to break even (Traceable fixed expenses Common fixed expenses) + Overall contribution margin (CM) ratio Dollar sales for company to break even - (Traceable fixed expenses-Common fixed expenses) Overall contribution margin (CM) ratio Dollar sales for company to break even (Traceable variable expenses Traceable fixed expenses) Overall contribution margin (CM) ratio Dollar sales for company to break even (Traceable variable expenses-Common fixed expenses) Overall contribution margin (CM) ratio.
10..
Given that the total cost, C, is related to sales volume, x, by the equation y=1000+0.2x, say true or false for the following and proof it. (a) The cost-sales line rises $2 for each increase of $10 in sales volume. (b) The slope of the line is interpreted as variable cost
3. A company has different output levels, and incurs different total production costs at each level, as follows. Total Costs Output (units) 6,000 8,000 44,700 57,700 c) If the selling price is SXX/unit at all levels, what is the B.E.P.? d) What is the breakeven revenue?
Question: Assume that you are an auditor of a company. Explain any THREE categories of assertions that you will be testing when auditing the financial statements of the company. You are required to: (iii.) Explain in detail the procedure adopted for collecting the audit evidence that you have mentioned in relation to question no.
How many statements below regarding margin of safety are correct? 1. It is the amount by which sales can be reduced without incurring a loss. 2. It is the difference between budgeted sales and breakeven sales. 3. It can be expressed in terms of unit, pesos or percentage of sales. 4. Its presence indicates that the company expects profit. 5. The product of margin of safety units and unit contribution margin is the projected profit for the period. 6. The higher the margin of safety, the lower is the risk of incurring operating loss. 3 4
O d. Contribution margin - fixed expenses - profit = 0 O e. Sales - fixed expenses - variable expenses = 0 Holding other factors constant, a company's contribution margin per unit will increase with: a. All answers given are NOT correct. b. any decrease in the selling price per unit O c. any increase in variable cost per unit O d. increase in its total fixed costs e. any increase in quantity sold. PAGE NEXT PA COLL CET 0001 A
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A company has a margin of safety of 25%, a contribution r a. What is the break-even point in sales dollars? $ b. What is the operating income? $ c. If neither the relationship between variable costs and sa