1.

Margin of Safety

a. If Canace Company, with a break-even point at $428,800 of sales, has actual sales of $640,000, what is the margin of safety expressed (1) in dollars and (2) as a percentage of sales? Round the percentage to the nearest whole number.

1. $fill in the blank 1

2. fill in the blank 2%

b. If the margin of safety for Canace Company was 20%, fixed costs were $996,800, and variable costs were 80% of sales, what was the amount of actual sales (dollars)? (Hint: Determine the break-even in sales dollars first.) $fill in the blank 3

2.

Break-even analysis for a service company

Sprint Corporation (S) is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 60 million direct subscribers (accounts) that generated revenue of $33,347 million. Costs and expenses for the year were as follows (in millions):

Cost of revenue	$14,958
Selling, general, and administrative expenses	7,994
Depreciation and amortization	8,150

Assume that 30% of the cost of revenue and 70% of the selling, general, and administrative expenses are fixed to the number of direct subscribers (accounts). In part (a) and (b), round all interim calculations and final answers to one decimal place.

a. What is Sprints break-even number of accounts, using the data and assumptions given? fill in the blank 1 million accounts

b. How much revenue per account would be sufficient for Sprint to break even if the number of accounts remained constant? $fill in the blank 2 million per account

3.

Operating Leverage

Beck Inc. and Bryant Inc. have the following operating data:

	Beck Inc.		Bryant Inc.
Sales	$217,100		$603,000
Variable costs	(87,100)		(361,800)
Contribution margin	$130,000		$241,200
Fixed costs	(80,000)		(107,200)
Operating income	$50,000		$134,000

a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place.

Beck Inc.	fill in the blank 1
Bryant Inc.	fill in the blank 2

b. How much would operating income increase for each company if the sales of each increased by 10%? If required, round answers to nearest whole number.

	Dollars	Percentage
Beck Inc.	$fill in the blank 3	fill in the blank 4	%
Bryant Inc.	$fill in the blank 5	fill in the blank 6	%