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GenaCL600 [577]
3 years ago
13

​Matthew's Fish Fry has a monthly target operating income of​ $6,600. Variable expenses are​ 80% of sales and monthly fixed expe

nses are​ $840. What is the monthly margin of safety in dollars if the business achieves its operating income​ goal?
A. ​$29,760
B. ​$41,400
C. ​$33,000
D. ​$37,200
Business
1 answer:
Natasha2012 [34]3 years ago
5 0

Answer:

The correct answer is C

Explanation:

Break even Sales is computed as:

Contribution margin ratio = Fixed Cost / Break even Sales

where

Contribution margin ratio = 1 - Variable expense of 80%

= 20%

Fixed Cost is $840

30% = $840 / Break even Sales

Break even Sales = $840 / 20%

= $4,200

The actual sales is computed as:

Actual Sales = (Fixed Cost + Desired Profit) /  Contribution margin ratio

= ($840 + $6,600) / 20%

= $7,440 / 0.2

= $37,200

The margin of safety is computed as:

Margin of Safety = Actual Sales - Break even sales

= $37,200 - $4,200

= $33,000

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Answer:

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PVA =C({1 – [1/(1 +r)t]} /r)

$14,500 = $500{[1 – (1/1.0155)t] / 0.0155}

Now we solve for t:

1/1.0155t = 1 − {[($14,500)/($500)](0.0155)}

1/1.0155t= 0.5505

1.0155t= 1/(0.5505) = 1.817

t = ln 1.817 / ln 1.0155 = 38.83 months

<u>Account will be paid off in 38.83 months.</u>

7 0
3 years ago
Suppose changes in autonomous consumption affect investment while changes in autonomous government spending do not. in this case
Charra [1.4K]
 in this case, identical changes in autonomous consumption and autonomous government spending: <span> have different effects on equilibrium income

When a factor is implemented and have two different reaction, it is safe to assume that that factor have two different effects.
For example, an increasing interest in technology(autonomous consumption) may increased the investment for tech products. The government spending may not give as much influence in this context because it wont affect the transaction between the customers and the producer
</span>
8 0
3 years ago
Ashton Company uses the perpetual method. The company's inventory account had a $6,600 balance as of December 31, Year 1. A phys
Lunna [17]

Answer:

Decrease Profit and Inventory Asset value as well.

Explanation:

This will Decrease the closing inventory value which will increase the cost of goods, decrease the profit and ultimately decrease the retained earning value in the balance sheet. It also decrease the Inventory value in the current assets section of balance sheet, which will ultimately decrease the total asset value.

7 0
3 years ago
The amount of safety time needed to protect a particular path in a project is less than the sum of the safety times required to
Shkiper50 [21]

Answer:

a. True

Explanation:

For computing the amount of safety time required for protecting a specific path we need to subtract the total of safety time in order to protect the individual activities who are making the path so that the path should be secure, safe and protected

Hence, the given statement is true

Therefore the correct option is a. True

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3 years ago
Brewster's is considering a project with a life of 5 years and an initial cost of $120,000. The discount rate for the project is
PSYCHO15rus [73]

Answer:

Net present value 27.792‬

Explanation:

<u>Sales</u> 2.100 units x 20 net cash flow =<em> $ 42,000 cash flow per year</em>

<u>Present value of the first three years:</u>

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\

C 42,000

time 3 years

discount rate: 0.12

42000 \times \frac{1-(1+0.12)^{-3} }{0.12} = PV\\

PV $100,876.9133

For year 4 and 5 we need to check for the expected cashflow

<u>We will multiply each outcome by their probability:</u>

1,400 units x $20 per unit x 0.5 chance =  14,000

2,500 units x $20 per unit x 0.5 chance = 25,000

expected return:    <em>39,000</em>

<u>present value of these years:</u>

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity  $39,000.0000

time   4 end of year 4th

rate  0.12

\frac{39000}{(1 + 0.12)^{4} } = PV  

PV   24,785.21

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity  $39,000.0000

time   5 end of year 5th

rate  0.12

\frac{39000}{(1 + 0.12)^{5} } = PV  

PV   22,129.65

<u>Net present value</u> will be the present value of the cash flow less the investment.

100,877 + 24,785 + 22,130 - 120,000 = 27.792‬

7 0
3 years ago
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