Question
Below is an income statement for XYZ Company: Sales $400,000 Variable costs (100,000) Contribution margin $300,000 Fixed costs (250,000) Net Income $ 50,000 1. Based
Below is an income statement for XYZ Company:
Sales | $400,000 |
Variable costs | (100,000) |
Contribution margin | $300,000 |
Fixed costs | (250,000) |
Net Income | $ 50,000 |
1. Based on the cost and revenue structure on the XYZ income statement, what was the break-even point in sales dollars (using the Y-formula)?
a. | $666,667
|
b. | $566,667
|
c. | $433,333
|
d. | $333,333 |
2. What was the XYZ's margin of safety (rounded to the nearest whole number)?
a. | 14% |
b. | 17% |
c. | 20% |
d. | 23% |
3. What was the XYZ's Degree of Leverage (DOL)?
a. | 4.00 |
b. | 5.00 |
c. | 6.00 |
d. | 7.00 |
4. Using the DOL that you just calculated (or any other method), if XYZ expects sales to increase 10% next year, what will the new net income be next year?
-
$65,000
-
$70,000
-
$75,000
-
$80,000
-
$85,000
5. Based on the cost and revenue structure on the XYZ income statement, XYZ is earning a net income equal to 12.5% ($50,000/$400,000) of sales. In order to earn a target net income equal to 25% of sales, what would the sales dollars have to be (using the Y-formula)?
a. | $200,000
|
b. | $300,000
|
c. | $400,000
|
d. | $500,000
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started