The following information was taken from Wampler Co.'s contribution income statement:

Sales $200,000
Variable costs 120,000
Fixed costs 60,000
Operating profit 20,000

What was Wampler's margin of safety percentage?

Question

The following information was taken from Wampler Co.'s contribution income statement:

Sales	$200,000
Variable costs	120,000
Fixed costs	60,000
Operating profit	20,000

What was Wampler's margin of safety percentage?

BlackTom AI · Accepted Answer

We begin by restating the data given: Sales = 200,000; Variable costs = 120,000; Fixed costs = 60,000; Operating profit = 20,000.

First, compute the contribution margin: Contribution margin = Sales − Variable costs = 200,000 − 120,000 = 80,000. This gives the contribution margin ratio: CM ratio = Contribution margin / Sales = 80,000 / 200,000 = 0.40 (or 40%).

Next, determine the break-even sales in dollars using the CM ratio: Break-even sales = Fixed costs / CM ratio = 60,000 / 0.40 = 150,000.

Now, calculate the margin of safety in dollars: Margin of safety (MOS) in dollars = Actual sales − Break-even sales = 200,000 − 150,000 = 50,000.

Finally, convert MOS to a percentage of sales: MOS percentage = MOS in dollars / Sales = 50,000 / 200,000 = 0.25 (or 25%).

Notes on potential answer choices (even though options aren’t listed here):
- If you used an alternative method, ensure you convert to a ratio of sales rather than a ratio to profits, and verify your CM ratio before computing break-even.
- A common trap is misplacing fixed costs or using the operating profit instead of the contribution margin; the correct approach relies on contribution margin (sales minus variable costs) to find break-even and MOS.
- The given operating profit of 20,000 is consistent with the numbers: 80,000 CM minus 60,000 fixed costs equals 20,000 operating profit, which corroborates the internal consistency of the data.

If options were available, you would compare the calculated MOS percentage (25%) to each option to determine which matches exactly.

2025Summer-ACC2002-02 Quiz 2 - Cost / Volume / Profit (CVP)

The following information was taken from Wampler Co.'s contribution income statement: Sales $200,000 Variable costs 120,000 Fixed costs 60,000 Operating profit 20,000 What was Wampler's margin of safety percentage?

查看解析

登录即可查看完整答案

类似问题

In CVP analysis the margin of safety is the:

Question at position 25 A company makes a single product that it sells for $16 per unit. Fixed costs are $76,800 per month and the product has a contribution margin ratio of 40%. If the company's actual sales are $224,000, its margin of safety is:$32,000$192,000$128,000$96,000

Simpson Manufacturing sells a product for $1,600 per unit. Fixed costs are $34,000, while the variable costs are $600 per unit. If the company has a 15% margin of safety, how many units were actually sold?

The cost card for RTY Ltd.’s single product is shown below: £ Direct material 6 Direct labour 4 Variable production overhead 2 Total variable cost £12 Total fixed cost £60,000 Budgeted sales are 20,000 units at a selling price of £20 per unit. The margin of safety is:

The margin of safety is the amount by which sales can decrease before losses are incurred by the company.

Black Company's sales are $565,000, its fixed expenses are $150,000, and its variable expenses are 60% of sales. Based on this information, the margin of safety (number of sales dollars that can be safely lost) is:

更多留学生实用工具

考试浏览器助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单