TRUE OR FALSE.1. Margin of safety = sales - break-even sales2. Payback period = Original investment / annual cash flow3. Accounting rate of return = Average annual cash flow / original investment4. Net present value = Present value of future cash flows from the project - Original investment5. A variable cost remains constant per unit at various levels of activity.6. A fixed cost remains constant in total and on a per unit basis at various levels of activity

Solution:- Introduction:- Sales means actual sales of company. Breakeven sales, where total revenue…

Answered: TRUE OR FALSE. 1. Margin of safety =…

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TRUE OR FALSE. 1. Margin of safety = sales - break-even sales

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

TRUE OR FALSE.
1. Margin of safety = sales - break-even sales
2. Payback period = Original investment / annual cash flow
3. Accounting rate of return = Average annual cash flow / original investment
4. Net present value = Present value of future cash flows from the project - Original investment
5. A variable cost remains constant per unit at various levels of activity.
6. A fixed cost remains constant in total and on a per unit basis at various levels of activity

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Calculate the Break-Even Sales Amount and Sales Amount of Company X with the attached P&L (Profit & Loss) table? -Analyze and interpret X Business Sales Price (Unit) Total Sales Quantity (units) Total Sales Amount (s*unit prc.) Variable Cost (units) Total Variable Cost (b.x) Contribution Margin Total Fixed Costs P/L (Profit/Loss) Profit Margin Contribution Margin (s-b) Contribution Margin Ratio (s-b) / s 100TL / Brm. 20.000,00 2.000.000,00 75,00 1.500.000,00 500.000,00 150.000,00 350.000,00 ? 25,00 25,00% Breakeven Point (Sales Unit) (a/KP) ? Breakeven Point (Sales Amount ?
Discuss two limitations of relying on a margin of safety when predicting future sales.
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What are the answers for the following? Construct a cost-volume-profit chart on your own paper. What is the break-even sales? What is the expected margin of safety in dollars and as a percentage of sales? Determine the operating leverage. Round to one decimal place.