Equation Method for Break-Even Analysis
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Questions and Answers

What is the sales manager proposing to change regarding the sales staff's compensation?

  • From $10,000 per year to $15 per Phone sold
  • From flat salaries to commission basis (correct)
  • From commission basis to flat salaries
  • From $15 per Phone sold to $10,000 per year
  • According to CVP analysis assumptions, what is one of the factors that affect costs?

  • Organizational culture
  • Market competition
  • Sales mix variability
  • Changes in activity level (correct)
  • What does the Margin of Safety measure?

  • Cushion provided by a level of sales (correct)
  • Quality of products sold
  • Difference between fixed and variable costs
  • Expected profit percentage
  • If the sales manager's confident increase in annual sales by 15% is achieved, what will be the new annual sales amount?

    <p>$12,500</p> Signup and view all the answers

    In the context of Margin of Safety, what does 'break-even point' refer to?

    <p>Point at which profit is zero</p> Signup and view all the answers

    What formula is used to calculate the margin of safety ratio?

    <p>(Margin of Safety in dollars) / (Actual sales)</p> Signup and view all the answers

    Which assumption of CVP analysis states that all units produced are sold?

    <p>All units produced are sold</p> Signup and view all the answers

    If the Margin of Safety in dollars for a company is $300,000 and the Expected Sales are $900,000, what is the margin of safety ratio?

    <p>$1 : 3</p> Signup and view all the answers

    How does the sales manager believe changing to a commission basis will impact annual sales?

    <p>Increase by 20%</p> Signup and view all the answers

    'Margin of Safety' can be expressed as __________.

    <p>$250,000 cushion provided by sales</p> Signup and view all the answers

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