Question

If Company A has a projected margin of safety of 22 percent while Company B has...

If Company A has a projected margin of safety of 22 percent while Company B has a margin of safety of 52 percent, which company is at greater risk when actual sales are less than budgeted?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer

Company A

Explanation:

Margin of safety refers to the excess of Actual sales over break-even sales.

Margin of Safety (in units) = Actual sales (in units) - Break even Point (in units)

In other words, Margin of safety shows the sales that the company has over break-even sales.

Company A has Margin of safety of 22%. It means that if sales decrease by more than 22%, it will incur losses.

Company B has Margin of safety of 52%. It means that if sales decrease by more than 52%, it will incur losses.

It can be clearly seen that company A is at more risk when actual sales are less than budgeted.

In case of any doubt or clarification, you're welcome to come back via comments.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Margin of Safety a. If Canace Company, with a break-even point at $518,500 of sales, has...
Margin of Safety a. If Canace Company, with a break-even point at $518,500 of sales, has actual sales of $850,000, what is the margin of safety expressed (1) in dollars and (2) as a percentage of sales? Round the percentage to the nearest whole number. 1. $_____ 2. _____% b. If the margin of safety for Canace Company was 35%, fixed costs were $1,676,675, and variable costs were 65% of sales, what was the amount of actual sales (dollars)? (Hint:...
Margin of Safety a. If Canace Company, with a break-even point at $392,200 of sales, has...
Margin of Safety a. If Canace Company, with a break-even point at $392,200 of sales, has actual sales of $530,000, what is the margin of safety expressed (1) in dollars and (2) as a percentage of sales? Round the percentage to the nearest whole number. 1. $ 2.   % b. If the margin of safety for Canace Company was 30%, fixed costs were $1,304,100, and variable costs were 70% of sales, what was the amount of actual sales (dollars)? (Hint:...
Margin of Safety a. If Canace Company, with a break-even point at $230,400 of sales, has...
Margin of Safety a. If Canace Company, with a break-even point at $230,400 of sales, has actual sales of $360,000, what is the margin of safety expressed (1) in dollars and (2) as a percentage of sales? Round the percentage to the nearest whole number. 1. $ 2.   % b. If the margin of safety for Canace Company was 40%, fixed costs were $1,372,800, and variable costs were 60% of sales, what was the amount of actual sales (dollars)? (Hint:...
Margin of Safety a. If Fama Company, with a break-even point at $525,600 of sales, has...
Margin of Safety a. If Fama Company, with a break-even point at $525,600 of sales, has actual sales of $720,000, what is the margin of safety expressed (1) in dollars and (2) as a percentage of sales? Round the percentage to the nearest whole number. 1. $ 2.   % b. If the margin of safety for Watkins Company was 35%, fixed costs were $1,410,500, and variable costs were 65% of sales, what was the amount of actual sales (dollars)? (Hint:...
Margin of Safety and Operating Leverage Medina Company produces a single product. The projected income statement...
Margin of Safety and Operating Leverage Medina Company produces a single product. The projected income statement for the coming year is as follows: Sales (60,000 units @ $23.00) $1,380,000 Total variable cost 372,600 Contribution margin $ 1,007,400 Total fixed cost 973,820 Operating income $ 33,580 Required: 1. Compute the break-even sales dollars. $ 2. Compute the margin of safety in sales dollars. $ 3. Compute the degree of operating leverage. 4. Compute the new operating income if sales are 20%...
Break-Even Units, Contribution Margin Ratio, Margin of Safety Khumbu Company's projected profit for the coming year...
Break-Even Units, Contribution Margin Ratio, Margin of Safety Khumbu Company's projected profit for the coming year is as follows: Total Per Unit Sales $3,331,250 $41.00 Total variable cost 999,375 12.30 Contribution margin $ 2,331,875 $ 28.7 Total fixed cost 1,009,369 Operating income $ 1,322,506 Required: 1. Compute the break-even point in units. If required, round your answer to nearest whole value. units 2. How many units must be sold to earn a profit of $240,000? If required, round your answer...
Break-Even Units, Contribution Margin Ratio, Margin of Safety Khumbu Company's projected profit for the coming year...
Break-Even Units, Contribution Margin Ratio, Margin of Safety Khumbu Company's projected profit for the coming year is as follows: Total Per Unit Sales $2,030,000 $40.00 Total variable cost 568,400 11.20 Contribution margin $ 1,461,600 $ 28.8 Total fixed cost 539,980 Operating income $ 921,620 Required: 1. Compute the break-even point in units. If required, round your answer to nearest whole value. units 2. How many units must be sold to earn a profit of $240,000? If required, round your answer...
Break-Even Units, Contribution Margin Ratio, Margin of Safety Khumbu Company's projected profit for the coming year...
Break-Even Units, Contribution Margin Ratio, Margin of Safety Khumbu Company's projected profit for the coming year is as follows: Total Per Unit Sales $3,150,000 $45.00 Total variable cost 819,000 11.70 Contribution margin $2,331,000 $ 33.3 Total fixed cost 819,000 Operating income $1,512,000 Required: 1. Compute the break-even point in units. If required, round your answer to nearest whole value. ______ units 2. How many units must be sold to earn a profit of $240,000? If required, round your answer to...
Break-Even Units, Contribution Margin Ratio, Margin of Safety Khumbu Company's projected profit for the coming year...
Break-Even Units, Contribution Margin Ratio, Margin of Safety Khumbu Company's projected profit for the coming year is as follows: Total Per Unit Sales $1,700,000 $25.00 Total variable cost 476,000 7.00 Contribution margin $ 1,224,000 $ 18 Total fixed cost 504,560 Operating income $ 719,440 Required: 1. Compute the break-even point in units. If required, round your answer to nearest whole value. units 2. How many units must be sold to earn a profit of $240,000? If required, round your answer...
Break-Even Units, Contribution Margin Ratio, Margin of Safety Khumbu Company's projected profit for the coming year...
Break-Even Units, Contribution Margin Ratio, Margin of Safety Khumbu Company's projected profit for the coming year is as follows: Total Per Unit Sales $3,543,500 $38.00 Total variable cost 1,133,920 12.16 Contribution margin $ 2,409,580 $ 25.84 Total fixed cost 1,020,528 Operating income $ 1,389,052 Required: . Compute the break-even point in units. If required, round your answer to nearest whole value. units 2. How many units must be sold to earn a profit of $240,000? If required, round your answer...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT