Henning Co

question 34

Essay

Henning Co. estimates that variable costs will be 70% of sales and fixed costs will total $2160000. The selling price of the product is $10 and 750000 units will be sold.
Instructions
Using the mathematical equation
(a) Compute the break-even point in units and dollars.
(b) Compute the margin of safety in dollars and as a ratio.
(c) Compute net income.

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Definitions:

Treasury Bills

Treasury bills are short-term government securities issued at a discount from the face value and mature in one year or less, representing a secure, low-risk investment option.

Portfolio

Group of assets such as stocks and bonds held by an investor.

Beta

A measure of a stock's volatility in relation to the overall market, where a beta greater than 1 indicates higher volatility and less than 1 indicates lower volatility.

Market Risk Premium

The additional return expected by investors for taking on the higher risk of investing in the stock market over a risk-free rate.