Chapter 9 Short-Term Profit Planning: Cost-Volume-Profit (CVP) Analysis 343variety of other types of merchandise. Because of normal seasonal and cyclical fluctuations in thelocal economy, he knows that his business will also have these fluctuations, and he is planning to useCVP analysis to help him understand how he can expect his profits to change with these fluctuations.Harold has the following information for his most recent year. Cost of goods sold represents the costpaid for the merchandise he sells, while operating costs represent rent, insurance, and salaries, whichare entirely fixed.Sales$650,000Cost of merchandise soldContribution marginOperating costsOperating profit422,500227,500105,000$122,500Required1. What is Harold's margin of safety (MOS) in dollars? What is the margin of safety (MOS) ratio?2. Of what managerial significance are the measures calculated in requirement 1?3. What is Harold's margin of safety (in dollars) and operating profit if sales should fall to $500,000? [LO 9-5]9-29 Margin of Safety Harold McWilliams owns and manages a general merchandise store in a ruralarea of Virginia. Harold sells appliances, clothing, auto parts, and farming equipment, among a wide

The corporation determines the excess value of sales after covering the total cost incurred by using…

variety of other types of merchandise. Because of normal seasonal and cyclical fluctuations in the local economy, he knows that his business will also have these fluctuations, and he is planning to use CVP analysis to help him understand how he can expect his profits to change with these fluctuations. Harold has the following information for his most recent year. Cost of goods sold represents the cost paid for the merchandise he sells, while operating costs represent rent, insurance, and salaries, which are entirely fixed. Sales $650,000 422,500 227,500 Cost of merchandise sold Contribution margin Operating costs Operating profit 105,000 $122,500 Required 1. What is Harold's margin of safety (MOS) in dollars? What is the margin of safety (MOS) ratio? 2. Of what managerial significance are the measures calculated in requirement 1? 3. What is Harold's margin of safety (in dollars) and operating profit if sales should fall to $500,000?

variety of other types of merchandise. Because of normal seasonal and cyclical fluctuations in the local economy, he knows that his business will also have these fluctuations, and he is planning to use CVP analysis to help him understand how he can expect his profits to change with these fluctuations. Harold has the following information for his most recent year. Cost of goods sold represents the cost paid for the merchandise he sells, while operating costs represent rent, insurance, and salaries, which are entirely fixed. Sales $650,000 422,500 227,500 Cost of merchandise sold Contribution margin Operating costs Operating profit 105,000 $122,500 Required 1. What is Harold's margin of safety (MOS) in dollars? What is the margin of safety (MOS) ratio? 2. Of what managerial significance are the measures calculated in requirement 1? 3. What is Harold's margin of safety (in dollars) and operating profit if sales should fall to $500,000?

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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