Question

**- The margin of safety is:**

a) The difference between estimated sales and breakeven sales.

b) Not a useful measure for management in understanding the risk associated with a product line.

c) The amount sales can drop before the target profit is met.

d) How far sales must increase to earn a profit.

**- Which of the following is the amount by which sales
could drop before profits reach the breakeven point?**

a) Operating leverage

b) Total contribution margin

c) Margin of safety

d) Incremental sales

**- The ratio of contribution margin ÷ profit is used to
compute a company’s:**

a) Expected fixed costs

b) Degree of operating leverage

c) Margin of safety

d) Margin of safety percentage

**- What is the relationship between the margin of safety
percentage and the degree of operating leverage?**

a) They are unrelated

b) They are always the same

c) They are reciprocals

d) They are both subject to management bias

**- At the breakeven point:**

a) Sales will be equal to variable costs plus target profit

b) Sales will be equal to variable costs plus fixed costs

c) Sales will be equal to fixed costs plus target profit

d) Fixed costs will be equal to variable costs

Answer #1

Q1. Answer is a. The difference between estimated sales and break even sales | |||||||

Q2. Answer is c. The margin of safety. | |||||||

Margin of safety represents the sale which could be dropped even then the firm is not at risk. | |||||||

Q3. Answer is b. Degree of Operating leverage. | |||||||

Q4. Answer is a. They are unrelated. | |||||||

Q5. Answer is b. Sales will be equal to variable cost plus fixed cost. | |||||||

At break even, total sales = total cost | |||||||

Break-Even Units, Contribution Margin Ratio, Multiple-Product
Breakeven, Margin of Safety, Degree of Operating Leverage
Jellico Inc.'s projected operating income (based on sales of
450,000 units) for the coming year is as follows:
Total
Sales
$11,700,000
Total variable cost
8,190,000
Contribution margin
$3,510,000
Total fixed cost
2,254,200
Operating income
$1,255,800
Required:
1(a). Compute variable cost per unit. Round
your answer to the nearest cent.
$per unit
1(b). Compute contribution margin per unit.
Round your answer to the nearest cent.
$per unit...

Break-Even Units, Contribution Margin Ratio, Multiple-Product
Breakeven, Margin of Safety, Degree of Operating Leverage
Jellico Inc.'s projected operating income (based on sales of
450,000 units) for the coming year is as follows:
Total
Sales
$ 11,700,000
Total variable cost
6,669,000
Contribution margin
$ 5,031,000
Total fixed cost
2,871,024
Operating income
$ 2,159,976
Required:
1(a). Compute variable cost per unit. Enter
your answer to the nearest cent.
$per unit
1(b). Compute contribution margin per unit.
Enter your answer to the nearest...

Break-Even Units, Contribution Margin Ratio, Multiple-Product
Breakeven, Margin of Safety, Degree of Operating Leverage
Jellico Inc.'s projected operating income (based on sales of
450,000 units) for the coming year is as follows:
Total
Sales
$ 11,700,000
Total variable cost
7,371,000
Contribution margin
$ 4,329,000
Total fixed cost
2,705,144
Operating income
$ 1,623,856
1(a). Compute variable cost per unit. Enter
your answer to the nearest cent.
$per unit
1(b). Compute contribution margin per unit.
Enter your answer to the nearest cent....

At the break-even point
sales equal total variable costs
contribution margin equals
total variable costs contribution margin equals total fixed
costs
sales equal total fixed costs
2. The amount by which actual or expected sales exceeds
break-even sales is referred to as
contribution margin
unanticipated profit
margin of safety
target net income

The breakeven point on a CVP graph is
the intersection of the fixed expense line and the total expense
line.
the intersection of the fixed expense line and the sales
revenue.
the intersection of the sales revenue line and the total expense
line.
the intersection of the sales revenue line and the y-axis.
Total contribution margin less total fixed expenses equals
sales revenue.
gross profit.
operating income.
contribution margin ratio.
If the sales price of a product increases while everything...

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Break-Even Units, Contribution Margin Ratio, Multiple-Product
Breakeven, Margin of Safety, Degree of Operating Leverage
Jellico Inc.'s projected operating income (based on sales of
450,000 units) for the coming year is as follows:
Total
Sales
$ 9,000,000
Total variable cost
5,310,000
Contribution margin
$ 3,690,000
Total fixed cost
2,476,400
Operating income
$ 1,213,600
Required:
1(a). Compute variable cost per unit. Enter
your answer to the nearest cent.
$per unit
1(b). Compute contribution margin per...

Coats R Us Inc., manufactures and sells men’s coats. Each coat
sells for $150 and the variable costs per coat is $80. The
company’s fixed costs are $1,400,000. The company has an income tax
rate of 50%.
Compute contribution margin, contribution margin percentage,
breakeven point in sales units, the revenues needed to
breakeven?
Coats R Us has a target monthly net income of $350,000. What is
its target monthly operating income? How many coats must be sold
each month to...

Oslo Company prepared the following contribution format income
statement based on a sales volume of 1,000 units (the relevant
range of production is 500 units to 1,500 units):
Sales
$
70,000
Variable expenses
38,500
Contribution margin
31,500
Fixed expenses
23,310
Net operating income
$
8,190
What is the break-even point in dollar sales?
. How many units must be sold to achieve a target profit of
$18,900?
What is the margin of safety in dollars? What is the margin of...

XYZ company's sales $800000, unit variable cost $8, fixed
expense $100000, and number of units sold equals 80000.
Requirements (1-10):
Net operating income.
2. Contribution margin percentage.
3. Unit fixed cost.
4. Break-even point in unit sold.
5. Break-even point in total sales dollar.
6. Unit sales to attain the target profit 76000.
7. Margin of safety (Units).
8. Margin of safety (%).
9. Degree of operating leverage.
10.In original information, if the number of quantity sold
increase by 10%,...

Oslo Company prepared the following contribution format income
statement based on a sales volume of 1,000 units (the relevant
range of production is 500 units to 1,500 units):
Sales
$
75,000
Variable expenses
45,000
Contribution margin
30,000
Fixed expenses
22,800
Net operating income
$
7,200
9.What is the break-even point in dollar sales?
10. How many units must be sold to achieve a target profit of
$18,000?
11. What is the margin of safety in dollars? What is the margin...

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