Which of the following is a correct definition of the margin of safety? The excess of contribution margin over fixed costs The excess of gross margin over target income 0 The excess of sales revenue over the breakeven point The excess of ner income over all costs (both variable and fixed

Which of the following is a correct definition of the margin of safety? The excess of contribution margin over fixed costs The excess of gross margin over target income 0 The excess of sales revenue over the breakeven point The excess of ner income over all costs (both variable and fixed

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 1MC: The amount of a units sales price that helps to cover fixed expenses is its ____________________. A....

See similar textbooks

Related questions

Q: When should a segment be dropped? only when the decrease in total contribution margin is less…

Q: The amount of revenue required to earn a target profit is equal to Total fixed cost divided by…

A: The break even sales are the sales where business earns no profit no loss.

Q: Contribution margin per unit is the amount by which a products unit selling price exceeds its…

A: Contribution margin:- Contribution margin Indicates how much money is left after variable costs are…

Q: Which of the following is correct? The break-even point occurs when: Select one: a. total variable…

A: Break even point is the point where the production level at which the production costs equal to the…

Q: Which of the following is called minimum point of production at which total cost is recovered:…

A: The margin of safety sales is calculated as difference between current sales and break even sales.

Q: Margin of safety is computed as Select one: O a. Contribution margin - Fixed costs O b. Breakeven…

A: Margin Of Safety is the difference between Break Even Sales and Actual Sales

Q: The margin of safety is equal to:

A: Financial accounting: Financial accounting is the process of recording, summarizing, and reporting…

Q: CVP analysis is most important for the determination of [A] sales revenue necessary to equal fixed…

A: Cost: It refers to the economic value incurred by the company for producing a product or service.

Q: Which of the following statements is NOT true? A) Total variable costs change with volume B) Fixed…

A: Variable Cost change with level of activity Fixed Costs per unit changes when the level of activity…

Q: Which costs will change with a decrease in activity within the relevant range? Unit variable cost…

A: Cost can be classified into two categories i.e fixed cost and variable cost. The fixed cost remains…

Q: Which of the following is true about the changes in fixed cost? An increase in production will…

A: Fixed Cost: It is a cost which is constant in the short run, it is not related to any change in the…

Q: Which of the following statements is true about fixed and variable costs? * Both costs are constant…

A: Solution:- When sales units are increases or decreases the total sales also increase or decreases…

Q: In applying the high-low method of cost estimation to mixed costs, how is the total fixed cost…

A: Mixed cost also called the semi variable cost . Mixed cost contains both fixed and variable cost .…

Q: On a CVP graph, the intersection of the sales revenue line and the total cost line is known as the:…

A: The Break-even point indicates that total units are to be sold by the business entity to recover its…

Q: when total contribution margin equals total fixed cost this indicates operating income true false

A: First we understand contribution margin Contribution margin means Variable cost deduct from Sales…

Q: Select the correct statement regarding fixed costs. A) Because they do not change, fixed costs…

A: Fixed costs are the costs that remain constant irrespective of the volume of production.

Q: The amount of increase or decrease in cost that is expected from a particular course of action as…

A: Discretionary cost: A discretionary expense is a cost that a business or household can survive…

Q: The total contribution margin is equivalent to the combined net profit and fixed costs. It can be…

A: Solution: The total contribution margin is equivalent to the combined net profit and fixed costs =…

Q: Select the correct statement regarding fixed costs. They do not change, because fixed costs should…

Q: Cost-Capacity calculation technique takes into account a constant exponent to relate different costs…

A: Sensitivity analysis is financial analysis that determine The potential percent gain or loss in…

Q: Which of the following statements about CVP analysis is true? O a. Unit selling price, unit variable…

A: Cost volume profit analysis is the methods to identify the impact on operating income due to the…

Q: The break-even point is that level of activity where a. total contribution margin equals the sum of…

A: At break-even point, there is no profit or no loss.

Q: Contribution margin is equal to [A] fixed cost - loss [B] profit + variable cost [C] sales - fixed…

Q: On a CVP graph, the intersection of the sales revenue line and the total cost line is known as the:…

A: CVP stands for Cost-Volume-Profit analysis. It is helpful in determining the change in the total…

Q: A changes in direct proportion to changes in the cost-driver level * mixed costs O fixed costs O…

A: If the change in cost and change cost driver level is of direct proportion, it is not fixed cost or…

Q: The break-even point is that level of activity where: Select one: O a. profit equals to zero. O b.…

A: Break-Even Point: It is the point of sales at which entity neither earns a profit nor suffers a…

Q: Which of the following is not a step st driver rate by the volume of cost w to reduce the costs of…

A: Explanation: Activity based costing is a costing technique where production is split into different…

Q: Which of the following statements about CVP analysis is true? O a. Operating income calculations in…

A: Selling price: Selling price is a price set by the supplier at which he is ready to sell his…

Q: Contribution margin per unit is the amount by which a product's unit selling price exceeds its…

A: Selling price: Selling price is a price set by the supplier at which he is ready to sell his goods.…

Q: The term 'break even' point is defined as when: A. fixed costs equal total revenues B. variable…

A: The formula for calculating the break even point in units: Break Even Point (in Units)=Fixed…

Q: Margin of safety ratio is computed by dividing excess of actual or budgeted sales from break- even…

A: Margin of safety ratio = Profit ratio / Contribution margin ratio

Q: Cost-Volume-Profit graph contains an "Area of Loss" and an "Area of Profitability". Which of the…

A: Meaning of Cost Volume-profit graph Cost Volume profit graph is also shortly called as CVP graph. It…

Q: When using CVP Analysis, Net Profit (positive NI) would occur when Fixed Costs (FC) exceed total…

A: Net income as per CVP analysis - sales - variable cost = contribution contribution - fixed cost =…

Q: The “plus” in cost-plus pricing is often referred to as Markup. Extra profit. Gross profit.…

A: Cost plus pricing means when selling price is fixed as a addition of profit on the cost price. For…

Q: simple cost analysis method to identify fixed costs and variable costs in a linear cost function is…

A: High low method is method which separates the elements of fixed cost and variable cost from the…

Q: Which of the following statements about determining the breakeven point is FALSE? a)…

A: The breakeven point is the level of production at which the costs of production equals the revenue…

Q: following Fixed costs, variable costs, sales, breakeven point value, safety threshold ratio

A: Given in the question: Sales 8500 Raw Materials 2350 Insurance 275 Loan…

Q: 1. The amount of increase or decrease in revenue that is expected from a particular course of action…

A: Differential costing is a technique where differential costs are considered relevant. Differential…

Q: In describing the cost formula equation Y = a + bX, which of the following statements is NOT…

A: Cost formula equation shows the combination or mixture of fixed costs and variable costs for…

Q: Fixed costs per unit . Can be estimated by the high-low method. O Remains the same when the level of…

A: The monetary value paid for the acquisition of something, or to run the operations of the…

Q: The formula for Contribution is Select one: a. Fixed cost + loss b. Sales - Variable cost c. Fixed…

A: Cost accounting system is a framework that guides the firm to calculate their cost and helps in…

Q: Which of the following do not increase or decrease when the volume of production changes? O a. Fixed…

A: Some cost do not get affected by the volume of production. It remains same at all the levels of…

Q: Write “True” if the statement is true and write “False” if the statement is false. Fixed cost is…

A: The total cost of production includes the variable costs, fixed costs and mixed costs.

Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

Which of the following is a correct definition of the margin of safety?

The excess of contribution margin over fixed costs

The excess of gross margin over target income

The excess of sales revenue over the breakeven point

The excess of ner income over all costs (both variable and fixed

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

When using CVP Analysis, Net Profit (positive NI) would occur when Fixed Costs (FC) exceed total Contribution Margin. TRUE FALSE
The formula for Contribution is Select one: a. Fixed cost + loss b. Sales - Variable cost c. Fixed cost - Profit d. Sales + Variable cost
Which of the following statement is correct for relevant costs? a.It is avoidable, future and measured by cash b.It is avoidable, future and measured by profit c.It is unavoidable, future and measured by cash d.It is unavoidable, future and measured by profit
When Total Contribution magrin equals total fixed costs, this indicates operating income True False
Contribution margin is the difference between total revenue and total variable costs. Select one: O True O False
A Cost-Volume-Profit graph contains an "Area of Loss" and an "Area ofProfitability". Which of the following best explains the difference between thetwo points on the graph? A. The area of loss represents the difference between Sales and Variable Cost.B. The area of loss begins with the concept that fixed costs have to be recovered priorto sales contributing to profit.C. The area of profit represents the difference between Sales and Variable Cost.D. The area of profit begins with the concept that no company would have any level ofsales below the break-even point.
a.Variable costs in the context of cost-volume-profit (CPV) analysis? b. Fixed costs in the context of CPV analysis? c. Contribution margin in the context of CPV analysis?
TRUE OR FALSE Net income under GAAP highlights differences between variable and fixed costs.
Which of the following statements about determining the breakeven point is FALSE? a) Breakeven revenues equal fixed costs divided by the variable cost per unit. b) Revenues equal fixed costs plus variable costs. c) Operating income is equal to zero. d) Contribution margin minus fixed costs is equal to zero.
Contribution margin is a.the same as sales revenue b.the excess of sales over variable costs c.another term for volume in the "cost-volume-profit" analysis d.profit
The margin of safety is equal to: a) Sales - (Fixed Costs/Contribution Margin Ratio) b) Sales - Net Income c) Sales - (Variable Costs/Contribution Margin) d) Sales - (Variable Costs + Fixed Costs)
What ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit? A. Margin of safety ratioB. Contribution margin ratioC. Costs and expenses ratioD. Profit ratio