The sales and cost data for two companies in the transportation industry are as follows: X...

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Question

The sales and cost data for two companies in the transportation industry are as follows: X...

The sales and cost data for two companies in the transportation industry are as follows:

X Company Y Company

Amount Percent Amount Percent

Sales $ 142,000 100.00 $ 142,000 100.00

Variable costs 85,200 60.00 42,600 30.00

Contribution margin 56,800 40.00 99,400 70.00

Fixed costs 34,000 70,000

Operating income (πB) $ 22,800 $ 29,400

X Company's margin of safety ratio (MOS%) (rounded) is:

Multiple Choice

-22.83%.

29.43%.

38.76%.

62.64%.

40.14%.

business accounting

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Answer 1

Answer #1

Answer

Company X
>Break Even sales = Fixed Cost / CM Ratio
= $ 34000 / 40%
= 34000 / 40%
= $ 85,000

>Break even sale as a % of sale = $ 85000 / 142000
= 59.86 %

>Margin of Safety % = 100% - 59.86%
= 40.14%

Correct Answer = Option #5: 40.14%

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Answer 2

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