Question

To improve the safety margin, which of the following should happen: increase the sales dollars break...

To improve the safety margin, which of the following should happen:

increase the sales dollars break even point.

increase the variable cost per unit

decrease selling prices, assuming the price change will have no effect on demand.

stimulate sales volume growth.

None of the above
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Homework Answers

Answer #1
  • To improve the safety margin, which of the following should happen:

Correct Answer: Stimulates Sales Volume Growth

This is because, Safety Margin depends on formula: Total Sales Volume – Break Even Volume

The more the sales volume, better will a Safety Margin.

  • Why other options are wrong:

increase the sales dollars break even point.

If Break Even point increases, and sales volume existing at same level, Safety margin will decrease.

increase the variable cost per unit

Increase in variable cost = less unit contribution = increase in break even units = fall in safety margin.

decrease selling prices, assuming the price change will have no effect on demand.

Decrease in sales price = less unit contribution = increase in break even units = fall in safety margin.

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