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

question 91

Multiple Choice

A company with an operating income of $72,000 and a contribution margin ratio of 56% has a margin of safety of: (Round the answer to the nearest whole number. )

• 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:

Potential Entry

The possibility or threat of new competitors entering a market, which can influence the behavior and strategies of existing firms.

Economic Inefficiency

Economic Inefficiency occurs when resources are not allocated optimally, leading to waste or missed opportunities in the production or distribution of goods and services.

Oligopoly

A market structure characterized by a small number of firms which dominate the market, leading to limited competition.

First-Mover Advantage

In game theory, the benefit obtained by the party that moves first in a sequential game. A situation that occurs in a sequential game if the player who gets to move first has an advantage in terms of final outcomes over the player(s) who move subsequently.