1. For 2012, Flint Corporation sold 100,000 units of its product for $20 each. T
ID: 2462903 • Letter: 1
Question
1.
For 2012, Flint Corporation sold 100,000 units of its product for $20 each. The variable cost per unit was $12, and Flint's margin of safety was 30,000 units. What was the amount of Flint's total fixed costs?
$560,000
$1,200,000
$800,000
$360,000
2.
The following income statement is provided for Flint, Inc.
Sales Revenue 50,000
Variable Cost 27,500
Fixed Cost 17,000
Net Income 5,500
What is this company's magnitude of operating leverage?
5.00
4.1
1.8
9.1
A.$560,000
B.$1,200,000
C.$800,000
D.$360,000
Explanation / Answer
1. answer : A. 560000
margin of safety = Budgeted sales - breakeven sales
30000 = 100000 - 70000
Break even sales in units = Fixed expenses / sales per unit - variable expenses per unit
70000 = Fixed expenses / 20 - 12
Fixed expenses = 560000.
2. operating leverage = contribution margin / net operating income
= 50000 -27500 / 5500 = 4.1.
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