A Company with an Operating Income of $72,000 and a Contribution

question 133

Multiple Choice

A company with an operating income of $72,000 and a contribution margin ratio of 56% has a margin of safety of:

• A) $40,320.
• B) $128,571.
• C) $163,636.
• D) It is not possible to determine the margin of safety from the information provided.

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Definitions:

LIFO

Last In, First Out, an inventory valuation method where the last items added to inventory are assumed to be the first sold.

Inventory Costing Methods

Techniques used to calculate the cost of inventory, including First-In, First-Out (FIFO), Last-In, First-Out (LIFO), and Average Cost methods.

Subsidiary Inventory Ledger

The subsidiary ledger containing individual accounts for items of inventory.

Inventory Levels

The quantity of products or materials a company has in stock at any given time.