A Company with a Break-Even Point at $900,000 in Sales

question 117

Essay

A company with a break-even point at $900,000 in sales revenue had fixed costs of $225,000. When actual sales were $1,000,000, variable costs were $750,000. Determine
(a) the margin of safety expressed in dollars,
(b) the margin of safety expressed as a percentage of sales,
(c) the contribution margin ratio, and
(d) the operating income.

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Definitions:

Hammer

A tool consisting of a weighted "head" fixed to a long handle that is swung to deliver an impact to a small area of an object.

Anvil

A heavy iron block used in metalworking as a surface upon which metals can be hammered and shaped.

Auditory Cortex

The part of the brain that processes auditory information, located in the temporal lobe.

Temporal Lobe

A region of the cerebral cortex responsible for processing auditory information and is involved in memory and emotion.