Suppose Morrison Corp.’s breakeven point is revenues of $1,100,000. Fixed costs are $660,000. Q1. Compute the contribution margin percentage. Q2. Compute the selling price if variable costs are $16 per unit. Q3. Suppose 75,000 units are sold. Compute the margin of safety in units and dollars. Q4. What does this tell you about the risk of Morrison making a loss? What are the most likely reasons for this risk to increase?
Suppose Morrison Corp.’s breakeven point is revenues of $1,100,000. Fixed costs are $660,000. Q1. Compute the contribution margin percentage. Q2. Compute the selling price if variable costs are $16 per unit. Q3. Suppose 75,000 units are sold. Compute the margin of safety in units and dollars. Q4. What does this tell you about the risk of Morrison making a loss? What are the most likely reasons for this risk to increase?
Chapter14: Capital Structure Management In Practice
Section14.A: Breakeven Analysis
Problem 7P
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Suppose Morrison Corp.’s breakeven point is revenues of $1,100,000. Fixed costs are $660,000.
Q1. Compute the contribution margin percentage.
Q2. Compute the selling price if variable costs are $16 per unit.
Q3. Suppose 75,000 units are sold. Compute the margin of safety in units and dollars.
Q4. What does this tell you about the risk of Morrison making a loss? What are the most likely reasons for this risk to increase?
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