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 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.
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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
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
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2. A company provided the following information: Sales Variable costs Fixed costs P500,000 P100,000 P200,000 | Required: A. What is the contribution margin ratio? 500,000 – 100,000 = 400,000 "Contribution Margin" 400,000/500,000 = 0.8 What is the level of sales in amount necessary to generate a profit of P40,000? C. What is the contribution margin ratio if the sales price is increased by 10%? Using the information in part C, what level of sales in amount is necessary to generate a profit of P40,000? D. B.
Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: Estimated Estimated Variable Cost Fixed Cost (per unit sold) Production costs: Direct materials $15 Direct labor 10 Factory overhead $451,600 Selling expenses: Sales salaries and commissions 93,800 Advertising 31,800 Travel 7,100 Miscellaneous selling expense 7,800 Administrative expenses: Office and officers' salaries 91,700 Supplies 11,300 Miscellaneous administrative expense 10,500 Total $705,600 $42 It is expected that 10,800 units will be sold at a price of $140 a unit. Maximum sales within…
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1. The difference between contribution margin and income from operations is ________. net income variable costs fixed costs None of these choices are correct. 2. The relationship between a company’s contribution margin and income from operations is measured by _____. contribution margin operating leverage margin of safety break-even point 3. The __________ is the relative distribution of sales among the products sold by a company. sales mix mixed cost product mix None of these choices are correct. 4. The unit selling price of the overall enterprise product equals the ________. average selling price of the products price of the highest-selling product in the mix sum of the unit selling prices of each product multiplied by its sales mix percentage price of the product having the lowest selling price
Cost Volume Profit (CVP) Relationships (Algo) You are provided with the following data. Unit sales Selling price per unit Variable expenses per unit Fixed expenses Target Profit 80,000 units $70 per unit $ 28 per unit $ 2,688,000 $ 1,610,000 Required: Compute the CM ratio and variable expense ratio. Compute the break-even. Compute the target profit. Compute the margin of safety with the original data. Compute the degree of operating leverage with the original data. Use the Degree of Operating Leverage to determine the new Net Operating Income if sales increase by: 16% 1. Use the Open Excel in New Tab button to launch this question. 2. When finished in Excel, use the Save and Return to Assignment button in the lower right to return to Connect.
1. What is the break-Even-Point (BEP) in units for the ABC corporation? 2. what is the BEP in dollars for the ABC corporation? 3. What is the Target income in units for the ABC corporation? 4. What is the Target income in dollars for the ABC company? 5. What is the contribution Margin Ratio for the ABC company?

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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