Answered: income statement. Assume that the…

income statement. Assume that the following information is within the relevant range. Sales (9,000 units) Variable expenses Contribution margin Fixed expenses $ 270,000 202,500 67,500 63,750

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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Question

4
Womack Corporation has provided the following contribution format
income statement. Assume that the following information is within the
relevant range.
Sales (9,000 units)
Variable expenses
Contribution margin
Fixed expenses
Net operating income
The margin of safety percentage is closest to:
O 75%
1%
O 6%
O 24%
$ 270,000
202,500
67,500
63,750
$3,750

Expert Solution

Step 1

Margin of safety is the difference of current sales and break even sales.

Break even sales is based on fixed costs and contribution margin per unit.

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Solved in 3 steps

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