Margin of Safety Expressions and Computations

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What is the break-even point in units?

10,000 units

5,000 units (correct)

3,000 units

P1,000,000

What is the break-even point in pesos?

P400,000

P1,000,000 (correct)

P1,200,000

P600,000

What is the unit contribution margin?

40%

P80 (correct)

P200

P120

What is the margin of safety in units?

3,000 units Signup and view all the answers

What is the margin of safety in pesos?

P600,000 Signup and view all the answers

What is the margin of safety rate?

37.50% Signup and view all the answers

What is the primary purpose of profit planning according to the text?

To anticipate profit under varying conditions Signup and view all the answers

Which costing system is preferred for profit planning according to the text?

Variable costing Signup and view all the answers

What is the relationship between contribution margin and fixed costs according to the text?

Contribution margin is used to cover fixed costs and generate profit Signup and view all the answers

How does the variable costing system determine profit according to the text?

Profit = Contribution Margin - Fixed Costs Signup and view all the answers

What is the relationship between sales volume and variable costs according to the text?

Variable costs change directly in relation to changes in sales volume Signup and view all the answers

What is the margin of safety and how is it related to profit according to the text?

The text does not mention the margin of safety or its relation to profit Signup and view all the answers

What does the Margin of Safety Ratio (MSR) indicate?

The proportion of margin of safety over budgeted sales Signup and view all the answers

What is the relationship between profit and the margin of safety?

Profit is directly related to the amount of margin of safety Signup and view all the answers

What does the breakeven point represent in relation to sales volume?

The point at which fixed and variable costs are covered by sales revenue Signup and view all the answers

How is the unit contribution margin calculated?

(Selling price - Variable cost) / Number of units sold Signup and view all the answers

What does the Margin of Safety indicate about a company's operations?

The amount above the break-even point that sales exceed Signup and view all the answers

How is the Margin of Safety Ratio (MSR) calculated?

(Margin of Safety / Budgeted Sales) x 100 Signup and view all the answers