Question

Add to Q & A % Edit & Create a Califorina Car Company 5. Compute CCC's estimated 2019 contribution margin ratio. In Case 1-4 you calculated the variable manufacturing costs that are presented for you in Exhibit 1-5.2. Assume that $2,000,000 of selling expenses and $1,000,000 of administrative expenses are variable. Hint: Compute total sales revenue and total variable costs at CCC's budgeted 2019 level of production and sales. There is a definition in the glossary for Contribution Margin. 6. Compute CCC's 2019 estimated breakeven sales level. 1. Discuss how likely it is that CCC will not attain a level of sales necessary to break even, if costs remain at the planned levels. In other words, will it take a large or small shortfall in projected sales to cause planned income to fall to zero? Requirement 5: Contribution Margin Ratio Total Reveme 196,587.500 Total Variable Costs $ 85,611.050 CMR $ 56.4596 Requirement 6: CCC Breakeven Total Fixed Costs 59,053,700 CMR 0.565 Breakeven Sales 104.609.755 Requirement 7: Risk Assessment P ^ le 3:17 PM 11/6/2018

please help me answer question 7

Answer 1

CCC is performing well and had already breakers even and the actual sales are far more than breakeven sales, this means that CC is already breaked even.

The margin of safety is 91,977,745, which is very huge, and companies sales should fall by a huge portion which is amount mentioned as above to bring the net income figure to zero.

It is most unlikely for the company that it sales falls to that low.