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:

Present Value

The current value of a future amount of money or stream of cash flows given a specified rate of return.

Executory Costs

Refers to the costs related to executing a lease that are neither initially capitalized nor recognized in the income statement immediately, typically involving future operating expenses under a lease agreement.

Minimum Lease Payments

The lowest amount that a lessee is obligated to pay over the lease term, excluding costs for services such as insurance and maintenance.

Operating Lease

An operating lease is an agreement allowing someone to use an asset without ownership, typically for shorter periods, and expenses are recorded as operating expenses.