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Compute the contribution margin ratio and the margin of safety ratio. Contribution margin ratio Margin of safety ratio 20 % %

Compute the contribution margin ratio and the margin of safety ratio. Contribution margin ratio Margin of safety ratio 20 % %

FINANCIAL ACCOUNTING
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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**Instruction:** Compute the contribution margin ratio and the margin of safety ratio. - **Contribution margin ratio:** 20% - **Margin of safety ratio:** _______% **Explanation:** The image provides a prompt to calculate two important financial metrics: 1. **Contribution Margin Ratio** - This is already provided as 20%. It shows the percentage of sales that exceeds total variable costs and contributes to covering fixed costs and generating profit. 2. **Margin of Safety Ratio** - This is not filled in. The margin of safety ratio measures the extent by which sales can drop before the business reaches its break-even point.
Transcribed Image Text:**Instruction:** Compute the contribution margin ratio and the margin of safety ratio. - **Contribution margin ratio:** 20% - **Margin of safety ratio:** _______% **Explanation:** The image provides a prompt to calculate two important financial metrics: 1. **Contribution Margin Ratio** - This is already provided as 20%. It shows the percentage of sales that exceeds total variable costs and contributes to covering fixed costs and generating profit. 2. **Margin of Safety Ratio** - This is not filled in. The margin of safety ratio measures the extent by which sales can drop before the business reaches its break-even point.
**Wildhorse Company Financial Overview for 2022** Wildhorse Company is engaged in bottling and distributing B-Lite, a diet soft drink. The product is marketed to retailers at a price of 50 cents per 16-ounce bottle. For the year 2022, the company's management has made the following estimations concerning revenues and costs: - **Sales**: $1,750,000 **Costs:** - **Direct Materials**: $450,000 - **Direct Labor**: $400,000 - **Manufacturing Overhead:** - Variable: $420,000 - Fixed: $120,000 - **Selling Expenses:** - Variable: $108,000 - Fixed: $54,000 - **Administrative Expenses:** - Variable: $22,000 - Fixed: $71,000 This table presents the anticipated financial allocations across various operational segments critical to the production and distribution process. The differentiation between variable and fixed expenses highlights the costs that fluctuate with production volume versus those that remain constant regardless of output levels.
Transcribed Image Text:**Wildhorse Company Financial Overview for 2022** Wildhorse Company is engaged in bottling and distributing B-Lite, a diet soft drink. The product is marketed to retailers at a price of 50 cents per 16-ounce bottle. For the year 2022, the company's management has made the following estimations concerning revenues and costs: - **Sales**: $1,750,000 **Costs:** - **Direct Materials**: $450,000 - **Direct Labor**: $400,000 - **Manufacturing Overhead:** - Variable: $420,000 - Fixed: $120,000 - **Selling Expenses:** - Variable: $108,000 - Fixed: $54,000 - **Administrative Expenses:** - Variable: $22,000 - Fixed: $71,000 This table presents the anticipated financial allocations across various operational segments critical to the production and distribution process. The differentiation between variable and fixed expenses highlights the costs that fluctuate with production volume versus those that remain constant regardless of output levels.
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