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Please show your work, I will need to know how to compute this. Harold McWilliams owns and manages a general merchandise store in a rural
Please show your work, I will need to know how to compute this.
Harold McWilliams owns and manages a general merchandise store in a rural area of Virginia. Harold sells appliances, clothing, auto parts, and farming equipment, among a wide variety of other types of merchandise. Because of normal seasonal and cyclical fluctuations in the local economy, he knows that his business will also have these fluctuations, and he is planning to use CVP analysis to help him understand how he can expect his profits to change with these fluctuations. Harold has the following information for his most recent year. Cost of goods sold represents the cost paid for the merchandise he sells, while Operating costs represent rent, insurance, and salaries, which are entirely fixed. Sales Cost of merchan dise sold $ Contrib ution margin Operati ng costs Operati ng profit 880,000 624,800 255,200 121,510 $ 133,690 Required: 1-a. What is Harold's margin of safety (MOS) in dollars? 1-b. What is the margin of safety (MOS) ratio? (Input your answer as a whole percentage rounded to two decimal places (i.e., .1567 = 15.67%).) 3. What is Harold's margin of safety (in dollars) and operating profit if sales should fall to $735,000? (Do not round intermediate calculations.)Step by Step Solution
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