For a profitable company, the amount by which sales can decline before losses occur is known as the
Answer(s): D
The margin of safely measures the amount by which sales may decline before losses occur. It equals budgeted or actual sales minus sales at the BEP. It may be stated in either units sold or sales revenue.
Which one of the following is true regarding a relevant range?
Answer(s): B
The relevant range is the range of activity over which unit variable costs and total fixed costs are constant. The incremental cost of one additional unit of production will be equal to the variable cost.
The breakeven point in units sold for Tierson Corporation is 44,000. If fixed costs for Tierson are equal to $880, 000 annually and variable costs are $10 per unit1 what is the contribution margin per unit for Tierson Corporation?
The breakeven point in units is equal to the fixed costs divided by the contribution margin per unit. Thus, the UCM is $20.00 ($880 .000 ÷ 44,000 units).
A manufacturer contemplates a change in technology that would reduce fixed costs from $800,000 to $700 .000. However, the ratio of variable costs to sales will increase from 68% to 80%.Whatwill happen to break-even level of revenues?
How much does each additional sales dollar contribute toward profit for a firm with $4 million break-even level of revenues and $1 .2 million in fixed costs including depreciation?
Answer(s): A
The $4 million breakeven level was calculated as follows: Solving for CM% results in CM% = 30%. Thus, 30% of every dollar, or $0.30, contributes towards profits.
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