At a 20 Percent Gross Margin,for Every $1 Increase in Fixed

question 25

Essay

At a 20 percent gross margin,for every $1 increase in fixed costs (e.g. ,insurance,salaries,rent,and utilities),by how many dollars do sales need to increase just to stay even?

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Definitions:

Income

Earnings generated from business activities over a period, often categorized as net, gross, operating, or non-operating income.

Dividends Paid

Payments made by a corporation to its shareholder members from its earnings or profits.

Fair-Value Method

An accounting approach where assets and liabilities are listed at their fair value, reflecting their current market price.

Majority-Owned Investment

An investment in which the parent company owns more than 50% of the subsidiary's voting stock.