Answer:
a. $750,000
b. $75,000
c. $33,000
Explanation:
We know that,
a. Margin of safety = Expected sales - break even sales
$1,000,000 × 25% = $1,000,000 - break even sales
$250,000 = $1,000,000 - break even sales
So, the break even sales = $750,000
b. Operating income = Contribution margin - fixed cost
where,
Contribution margin = $1,000,000 × 30% = $300,000
And, the fixed cost = $750,000 - $750,000 × 70%
= $750,000 - $525,000
= $225,000
Or we can do one thing also
Break even point = Fixed cost ÷ contribution margin ratio
$750,000 = Fixed cost ÷ 30%
So, the fixed cost is $225,000
Now put these values to the above formula
So, the value would equal to
= $300,000 - $225,000
= $75,000
c. Additional operating income would be
= $110,000 × 30%
= $33,000
