Ideal Company Ideal Company Produces and Sells a Single Product

question 16

Multiple Choice

Ideal Company Ideal Company produces and sells a single product.Information on its costs follow:
$\begin{array}{ll}\text{Variable costs:}\\~~\text { SG\&A } & \$ 2 \text { per unit } \\~~\text { Production } & \$ 4 \text { per unit } \\\text { Fixed costs: } & \\~~\text { SG\&A } & \$ 12,000 \text { per year }\\~~\text { Production } & \$ 15,000 \text { per year } \end{array}$ Refer to Ideal Company.In the upcoming year,Ideal Company estimates that it will produce and sell 4,000 units.The variable costs per unit and the total fixed costs are expected to be the same as in the current year.However,it anticipates a sales price of $16 per unit.What is Ideal Company's projected margin of safety for the coming year?

• A)$7,000
• B)$20,800
• C)$18,400
• D)$13,000

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Definitions:

Start-up Stage

The early phase in the lifecycle of a company where it is developing its product or service, seeking to establish its market presence, and often characterized by initial funding rounds.

Industry Growth

The process of expanding production and sales in a particular sector, often measured by increases in revenue, market share, or productivity.

Industry Life Cycle

A concept that describes the stages of growth and development through which an industry progresses over time, including introduction, growth, maturity, and decline.

Fundamental Analysis

A method of evaluating a security in an attempt to measure its intrinsic value, by examining related economic, financial, and other qualitative and quantitative factors.