The Following Monthly Data Are Available for Seasons Company Which

question 10

Multiple Choice

The following monthly data are available for Seasons Company which produces only one product: Selling price per unit $42; Unit variable expenses $14; Total fixed expenses $42000; Actual sales for the month of June 4000 units. How much is the margin of safety for the company for June?

• A) $70000
• B) $105000
• C) $63000
• D) $2500

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Definitions:

Allowance Method

An accounting technique used to estimate and account for potential uncollectible accounts receivable and bad debts.

Uncollectible Receivables

Debts owed to a company that are deemed unrecoverable and are written off as a loss because the debtor is unable to pay.

Allowance for Doubtful Accounts

An estimation of the amount of accounts receivable that may not be collected, which is used as a contra asset to adjust the net value of accounts receivable.

Direct Write-off Method

An accounting approach where uncollectable debts are directly written off against income at the time they are deemed non-recoverable.