If a Business Had a Capacity of $10,000,000 of Sales,actual

question 93

Multiple Choice

If a business had a capacity of $10,000,000 of sales,actual sales of $6,000,000,break-even sales of $4,500,000,fixed costs of $1,800,000,and variable costs of 60% of sales,what is the margin of safety expressed as a percentage of sales?

• A)25%
• B)18%
• C)33.3%
• D)15%

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account that reduces the total amount of accounts receivable to reflect those that are expected to go uncollected.

Uncollectible

Accounts receivable that cannot be recovered or are very unlikely to be paid by debtors.

Income Statement Approach

An analytic method focusing on revenues and expenses to determine the net income of a business within a specific period.