Chapter 2, Problem 1TF15

1.

To determine

Introduction:

Margin of safety: It is supposed to be the difference amount of actual sales and the break-even sales. It plays an important role by depicting the revenue value which can be reduced to equalize to the break-even point of no profit- no loss.

The contribution margin per unit.

2.

To determine

Introduction:

Margin of safety: It is supposed to be the difference amount of actual sales and break-even sales. It plays an important role by depicting the revenue value which can be reduced to equalize to the break-even point of no profit- no loss.

The contribution margin ratio.

3.

To determine

Introduction:

Margin of safety: It is supposed to be the difference amount of actual sales and break-even sales. It plays an important role by depicting the revenue value which can be reduced to equalize to the break-even point of no profit- no loss.

The variable expense ratio.

4.

To determine

Introduction:

Margin of safety: It is supposed to be the difference amount of actual sales and break-even sales. It plays an important role by depicting the revenue value which can be reduced to equalize to the break-even point of no profit- no loss.

The net operating income if sales increases to 1001 units.

5.

To determine

Introduction:

Margin of safety: It is supposed to be the difference amount of actual sales and break-even sales. It plays an important role by depicting the revenue value which can be reduced to equalize to the break-even point of no profit- no loss.

The net operating income if sales decreases to 900 units.

6.

To determine

Introduction:

Margin of safety: It is supposed to be the difference amount of actual sales and break-even sales. It plays an important role by depicting the revenue value which can be reduced to equalize to the break-even point of no profit- no loss.

The net operating income if sales volume decreases by 100 units with an increase of $2 per unit in selling price.

7.

To determine

Introduction:

Margin of safety: It is supposed to be the difference amount of actual sales and break-even sales. It plays an important role by depicting the revenue value which can be reduced to equalize to the break-even point of no profit- no loss.

The net operating income with an increase in variable cost by $1, advertising cost by $1500 unit sales by 250 units.

8.

To determine

Introduction:

Margin of safety: It is supposed to be the difference amount of actual sales and break-even sales. It plays an important role by depicting the revenue value which can be reduced to equalize to the break-even point of no profit- no loss.

The break-even point in unit sales.

9.

To determine

Introduction:

Margin of safety: It is supposed to be the difference amount of actual sales and break-even sales. It plays an important role by depicting the revenue value which can be reduced to equalize to the break-even point of no profit- no loss.

The break-even point in dollar sales.

10.

To determine

Introduction:

Margin of safety: It is supposed to be the difference amount of actual sales and break-even sales. It plays an important role by depicting the revenue value which can be reduced to equalize to the break-even point of no profit- no loss.

The number of units to be sold to achieve a target profit of $5000.

11.

To determine

Introduction:

Margin of safety: It is supposed to be the difference amount of actual sales and break-even sales. It plays an important role by depicting the revenue value which can be reduced to equalize to the break-even point of no profit- no loss.

The margin of safety in dollars along with its percentages.

12.

To determine

Introduction:

Margin of safety: It is supposed to be the difference amount of actual sales and break-even sales. It plays an important role by depicting the revenue value which can be reduced to equalize to the break-even point of no profit- no loss.

The degree of operating leverage.

13.

To determine

Introduction:

Margin of safety: It is supposed to be the difference amount of actual sales and break-even sales. It plays an important role by depicting the revenue value which can be reduced to equalize to the break-even point of no profit- no loss.

To determine: The degree of operating leverage when the percent in net operating income increases with an increase of 5% in sales.

14.

To determine

Introduction:

Margin of safety: It is supposed to be the difference amount of actual sales and break-even sales. It plays an important role by depicting the revenue value which can be reduced to equalize to the break-even point of no profit- no loss.

The degree of operating leverage when total variable expenses are $6000; total fixed expenses are $12000.

15.

To determine

Introduction:

Margin of safety: It is supposed to be the difference amount of actual sales and break-even sales. It plays an important role by depicting the revenue value which can be reduced to equalize to the break-even point of no profit- no loss.

The estimated percent increase in net operating income of a 5% increase in sales.