If budgeted sales are 50 units and breakeven sales are 12 units, the margin of safety in units is __________?
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Answer: B. 38
Explanation
Subtracting the breakeven sales of twelve units from the budgeted sales of fifty units yields thirty-eight units. This difference represents the buffer available before the company incurs a financial loss. Margin of safety measures the cushion a business has if sales drop below expected levels before losses occur. It can be expressed in units, revenue dollars, or as a percentage of budgeted sales.
Risk-conscious investors review safety margins to gauge business resilience during economic downturns or recessions. A larger margin indicates lower operational risk and greater stability. Options A, C, and D stem from incorrect addition or subtraction of the baseline unit figures. Option B accurately reflects the correct mathematical difference between budgeted and breakeven units.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
Related questions
Q1. If the change in variable costing operating income is $18000 and the unit contribution margin is $9000, the change in units sold is __________?
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Answer: A. $2 per unit
The change in units sold is derived from operating income changes and unit contribution margins.
Q2. If the change in variable costing operating income is $9000 and the unit contribution margin is $6000, the change in units sold is __________?
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Answer: B. $1.5 per unit
Changes in variable costing operating income relate to changes in units sold and unit contribution margins.
Q3. If budgeted direct labor hours total 3800 and budgeted direct labor cost is $480000, the budgeted direct labor rate is ___________?
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Answer: A. $126.32 per labor hour
Dividing the budgeted direct labor cost of four hundred eighty thousand dollars by thirty-eight hundred hours yields approximately one hundred twenty-six dollars and thirty-two cents. This represents the standard hourly...
Q4. If the contribution margin is $25000 and total revenues are $60000, the total variable costs are __________?
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Answer: D. $35,000
Subtracting contribution margin from total revenues gives total variable costs. This formula rearranges the standard contribution margin calculation equation. The resulting thirty-five thousand dollars accurately represe...
Q5. If the budgeted input price is $80 and the price variance is $40, the actual price is ___________?
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Answer: B. $120
Adding the price variance to the budgeted input price gives actual price. This calculation reverses the standard price variance formula components. The resulting one hundred twenty dollars represents the exact actual pri...
Q6. If indirect support labor is $5000, equipment maintenance setup cost is $7000, and machinery lease cost is $4000, the total variable fixed cost is ___________?
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Answer: B. $12,000
Total cost is found by summing the individual support, maintenance, and lease cost components.