Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please assist. Target Income and Margin of Safety At the breakeeven point, sales and costs are exactly equal. However, the goal of most companies is

Please assist.

image text in transcribed
Target Income and Margin of Safety At the breakeeven point, sales and costs are exactly equal. However, the goal of most companies is to make a prot. when a company decides that it wanis to earn more than the breakeeven point of income, it must dene the amount it thian it will realistically make. By modifying the breakeeven equation, the sales required to earn a target or desired amount of prot may be computed. Complete the following: [fa company makes $5 off of each unit it sells and has a target operating income of $5,000, then it must sell C] units. Similarly, if a company has a target operating income of $75,000 and knows that total expenses for the period will be $75,000, how much revenue must it earn to reach ii: target operating income? D Units sold or revenue earned above and beyond the break-even point contributes to the margin of safety for a company. Margin of safety is a crude measure of risk, in that it serves as the padding between prot and the break-even point. Complete the following: Expressed in terms of units, ifa company hits its break-even point in units (say, 100 units) and actually sells 400 units, then the margin of safety is- J units. Similarly, ifthe break-even point in sales revenue is $200,000, and it . actually has sales revenue of $400,000, then its margin ofsafetyi

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting Volume 1

Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod Dick

7th Edition

1260306747, 978-1260306743

More Books

Students also viewed these Accounting questions