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

question 49

Multiple Choice

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

• A)25%
• B)18%
• C)33.3%
• D)15%

---

Definitions:

Direct Method

An accounting method used to allocate service department costs directly to producing departments without any intermediate allocation.

Operating Activities

Operating activities involve the primary, day-to-day activities that a company engages in to generate revenue, such as sales, provision of services, and production.

Credit Sales

Sales made on credit, where the payment is received after the delivery of the goods or services.

Cash Dividends

Cash dividends are payments made by a company out of its profits to shareholders, distributed in cash, representing a share of the corporation's earnings.