Question

e statement 11. Hedman Corporation has provides the followin Nowing information is within the relevant range g statement. Assume that has $ Sales (9,000 units) Variable expenses Contribution margin Fixed expenses Net operating income The margin of safety percentage is closest to: A) 7596 B) 196 270,000 202.500 67,500 63.750 3.750 $ D) 2.4% _12. Cassius Corporation has provided the following contributio us Corporation has provided the following contribution format income statement. Assume that following information is within the relevant range. Sales (7.000 units) 210,000 Variable expenses 136.500 73.500 Contribution margin Fixed expenses 67,200 6,300 Net operating income Ihe number of units that must be sold to achieve target profit of $31,500 is closest to: A) 42,000 units B) 16,400 units C) 35,000 units D) 9.400 units 13. Creswell Corporation's fixed monthly expenses are $29.000 and its contribution margin ratio is! Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net income in a month when sales are $95,000? A) S12,800 B) $24,200 C) $53,200 D) $66,000 _14. Gayne Corporation's contribution margin ratio is 12% and its fixed monthly expenses are $84, company's sales for a month are $738,000, what is the best estimate of the company's net operating inco that the fixed monthly expenses do not change. A) 5565,440 B) $654,000 C) $88,560 D) $4,560 15. Goodman Corporation has sales of 3,000 units at $80 per unit. Variable costs are 35% of the total fixed costs are $66,000, the degree of operating leverage is: A) 0.79 B) 0.93 C) 2.67 D) 1.73 _16. Sorin Inc., a company that produces and sells a single product, has provided its contributio statement for January. Sales (4,200 units) S 155,400 Variable expenses 100,800 Contribution margin 54,600 Fixed expenses 42,400 Net operating income $ 12,200 If the company sells 4,600 units, its total contribution margin should be closest to: A) $54,600 B) $59,800 C) $69,400 D) $13,362

Answer 1

Solution to QUESTION-11

Contribution margin ratio = [Contribution margin / Sales] x 100

= [$67,500 / $270,000] x 100

= 25.00%

Break even sales in dollars = Total fixed expenses / Contribution margin ratio

= $63,750 / 0.25

= $255,000

Margin of safety in dollars = Target total sales – Break even sales

= $270,000 - $255,000

= $15,000

Therefore, the margin of safety percentage = [Margin of safety in dollars / Total sales] x 100

= [$15,000 / $270,000] x 100

= 6%

“Hence, the margin of safety percentage will be (c). 6%”