Boswell Company Reported the Following Information for the Current Year

question 92

Multiple Choice

Boswell Company reported the following information for the current year: Sales (50,000 units) $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and fixed costs $360,000. What is Boswell's contribution margin ratio?

• A)68%.
• B)45%.
• C)32%.
• D)55%.

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Definitions:

Interest Tax Shield

The decrease in income tax liabilities due to permitted interest expense deductions.

Levered Firm

A corporation that has debt in its capital structure, indicating it uses borrowing (leverage) to finance its operations or expansions.

M&M Proposition I

A principle of financial theory stating that under perfect market conditions, the value of a firm is unaffected by how it is financed.

Liquidation

The process of converting assets into cash or cash equivalents by selling them in the market.