ERamIIl-Chapters 5 and 15/Fall 2017 UE/EALSE. Write T if the statement is true a
ID: 2562050 • Letter: E
Question
ERamIIl-Chapters 5 and 15/Fall 2017 UE/EALSE. Write T if the statement is true and F if the statement is false. 1) The total volume in sales dollars that would be required to attain a given target profit is 2) Fawn Company's margin of safety is $90,000. If the company's sales drop by $80,000, it ULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. determined by dividing the target profit by the contribution margin ratio. 1) will still have positive net operating income. 2) 3) If the contribution margin is not sufficient to cover fixed expenses: A) variable expenses equal contribution margin B) contribution margin is negative. C) a loss occurs. D) total profit equals total expenses. 4) Break-even analysis assumes that: 4) A) Unit fixed expense is constant B) Total revenue is constant. C) Selling prices must fall in order to generate more revenue. D) Unit variable expense is constant. 5) Rovinsky Corporation, a company that produces and sells a single product, has provided i 5) contribution format income statement for November. Sales (5,700 units) Variable expenses Contribution margin Fixed expenses Net operating income 319,200 188,100 131,100 106,500 24,600 e the company sells 5,300 units, its net operating income should be closest to: A) $15,400 B) $2,200 D) $24,600 Q)$22,874 A-1Explanation / Answer
Answer to Question 1.
False.
The Total Volume in Sales dollars required to attain a desired profit can be calculated by dividing sum total of Fixed Cost and Target profit with Contribution Margin Ratio.
Unit Dollar Sales for Target Profit = (Fixed Expenses + Target Profit) / Contribution Margin Ratio
Answer to Question 2.
True.
Margin of Safety is excess of actual sales over Break Even Sales. If the margin of Safety is $90,000 and the actual sales drops by $80,000 then the Margin of Safety will also reduce by $80,000. The Revised Margin of Safety will be $10,000, which indicates the actual sales is more by $10,000 in comparison to Break even sales, which means the Company will earn Net income.
Answer to Question 3.
Option C i.e. A Loss occurs.
Net Income is excess of Contribution Margin over Fixed Expenses. If Fixed Expenses are more than the Contribution Margin, the company suffers a Net Loss.
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