Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. below is an income statement for xyz company:

Below is an income statement for XYZ Company: Sales...

50.1K

Verified Solution

Question

Accounting

Below is an income statement for XYZ Company:

Sales

$400,000

Variable costs

(100,000)

Contribution margin

$300,000

Fixed costs

(250,000)

Net Income

$ 50,000

1. Based on the cost and revenue structure on the XYZ income statement, what was the break-even point in sales dollars (using the Y-formula)?

a.

$666,667

b.

$566,667

c.

$433,333

d.

$333,333

2. What was the XYZ's margin of safety (rounded to the nearest whole number)?

a.

14%

b.

17%

c.

20%

d.

23%

3. What was the XYZ's Degree of Leverage (DOL)?

a.

4.00

b.

5.00

c.

6.00

d.

7.00

4. Using the DOL that you just calculated (or any other method), if XYZ expects sales to increase 10% next year, what will the new net income be next year?

  1. $65,000

  1. $70,000

  1. $75,000

  1. $80,000

  1. $85,000

5. Based on the cost and revenue structure on the XYZ income statement, XYZ is earning a net income equal to 12.5% ($50,000/$400,000) of sales. In order to earn a target net income equal to 25% of sales, what would the sales dollars have to be (using the Y-formula)?

a.

$200,000

b.

$300,000

c.

$400,000

d.

$500,000

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students