Jakarta Company is a service firm with current service revenue of $400,000 and a 40% contribution margin. Its fixed costs are $64,000. Maldives Company has current sales of $6,610,000 and a 45% contribution margin. Its fixed costs are $1,933,425. A. What is the margin of safety for Jakarta and Maldives? If required, round final answers to one decimal place. Margin of safety for Jakarta: fill in the blank 1% Margin of safety for Maldives: fill in the blank 2% B. Compare the margin of safety in dollars between the two companies. Which is stronger? a. Maldives is stronger because its margin of safety is $2,313,500 whereas Jakarta’s is $240,000. b. Maldives is stronger because its margin of safety is $240,000 whereas Jakarta’s is $2,313,500. c. Jakarta is stronger because its margin of safety is $2,313,500 whereas Maldives’s is $240,000. d. Jakarta is stronger because its margin of safety is $240,000 whereas Maldives’s is $2,313,500. C. Compare the margin of safety in percentage between the two companies. Now, which one is stronger? a. Maldives is stronger because its % margin of safety is 35.0% whereas Jakarta’s is 60%. b. Maldives is stronger because its % margin of safety is 50% whereas Jakarta’s is 35.0%. c. Jakarta is stronger because its % margin of safety is 35.0% whereas Maldives’s is 60%. d. Jakarta is stronger because its % margin of safety is 60% whereas Maldives’s is 35.0%. D. Compute the degree of operating leverage for both companies. If required, round final answers to two decimal places. Operating leverage: Jakarta fill in the blank 5 Maldives fill in the blank 6 Compare the degree of operating leverage for both companies. Which company will benefit most from a 10% increase in sales? a. Operating leverage for Jakarta is 1.67; for Maldives it is 2.86. Maldives will benefit most from an increase in sales. b. Operating leverage for Jakarta is 1.67; for Maldives it is 2.86. Jakarta will benefit most from an increase in sales. c. Operating leverage for Jakarta is 2.86; for Maldives it is 1.67. Maldives will benefit most from an increase in sales. d. Operating leverage for Jakarta is 2.86; for Michelle it is 1.67. Jakarta will benefit most from an increase in sales.
Jakarta Company is a service firm with current service revenue of $400,000 and a 40% contribution margin. Its fixed costs are $64,000. Maldives Company has current sales of $6,610,000 and a 45% contribution margin. Its fixed costs are $1,933,425.
A. What is the margin of safety for Jakarta and Maldives? If required, round final answers to one decimal place.
| Margin of safety for Jakarta: | fill in the blank 1% |
| Margin of safety for Maldives: | fill in the blank 2% |
B. Compare the margin of safety in dollars between the two companies. Which is stronger?
a. Maldives is stronger because its margin of safety is $2,313,500 whereas Jakarta’s is $240,000.
b. Maldives is stronger because its margin of safety is $240,000 whereas Jakarta’s is $2,313,500.
c. Jakarta is stronger because its margin of safety is $2,313,500 whereas Maldives’s is $240,000.
d. Jakarta is stronger because its margin of safety is $240,000 whereas Maldives’s is $2,313,500.
C. Compare the margin of safety in percentage between the two companies. Now, which one is stronger?
a. Maldives is stronger because its % margin of safety is 35.0% whereas Jakarta’s is 60%.
b. Maldives is stronger because its % margin of safety is 50% whereas Jakarta’s is 35.0%.
c. Jakarta is stronger because its % margin of safety is 35.0% whereas Maldives’s is 60%.
d. Jakarta is stronger because its % margin of safety is 60% whereas Maldives’s is 35.0%.
D. Compute the degree of operating leverage for both companies. If required, round final answers to two decimal places.
| Operating leverage: | |
| Jakarta | fill in the blank 5 |
| Maldives | fill in the blank 6 |
Compare the degree of operating leverage for both companies. Which company will benefit most from a 10% increase in sales?
a. Operating leverage for Jakarta is 1.67; for Maldives it is 2.86. Maldives will benefit most from an increase in sales.
b. Operating leverage for Jakarta is 1.67; for Maldives it is 2.86. Jakarta will benefit most from an increase in sales.
c. Operating leverage for Jakarta is 2.86; for Maldives it is 1.67. Maldives will benefit most from an increase in sales.
d. Operating leverage for Jakarta is 2.86; for Michelle it is 1.67. Jakarta will benefit most from an increase in sales.
Margin of safety is the level of sales above the break even point sales. It is the difference between the actual sales and breakeven sales.
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