If a Company Desires to Increase Its Safety Margin, It

question 4

Multiple Choice

If a company desires to increase its safety margin, it should:

• A) increase fixed costs.
• B) decrease the contribution margin.
• C) decrease selling prices, assuming the price change will have no effect on demand.
• D) stimulate sales volume.
• E) attempt to raise the break-even point.

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Definitions:

Unearned Fees

Income received by a company for services or goods that have yet to be provided or delivered.

Supplies Expense

The cost incurred from acquiring supplies used in the operation of a business, not directly tied to production.

Adjusted Trial Balance

A compilation of every account along with its adjusted balances, utilized for the creation of financial reports.

Vertical Analysis

Vertical analysis is a financial statement analysis method where each line item on a statement is listed as a percentage of another line item, facilitating comparisons and highlighting changes over time or across companies.