1. if the margin of safety for abc co. was 25%, fixed costs were 1,200,000 and v
ID: 2434307 • Letter: 1
Question
1. if the margin of safety for abc co. was 25%, fixed costs were 1,200,000 and variable costs were 75% of sales, what was the amt of actual sales dollars?2. currently the unit selling price of a product is $280, the unit variable cost is $230, and the total fixed costs are $525,000. a proposal is being evaluated to increase the unit selling price to $300. Compute the anticipated break-even sales (units) assuming that the unit selling price is increased and all costs remain constant.
3. a business issued a 30-day, 4% note for 60,000 to a creditor on account. illustrate the effects on the accounts and financial statements of recording (a)the issuance of the note and (b)the pmt of the note at maturity, incl. interest.
Explanation / Answer
Breakeven sales (x)would be .25x- 1,200,000= 0 x= 1,200,000/.25= 4,800,000 If they had a 25% margin of safety sales would have been 4,800,000/.75= 6,400,000 If they raise the price to 300 the variable cost per unit would be (300-230)=70 So the breakeven point in units would be 525,000/70= 7,500 units. Assuming the account was classified as an accounts payable before the note was issued: Debit Accounts Payable 60,000 Credit Notes Payable 60,000 When the note is paid Debit Interest Expense 200 (60,000 *.04*30/360) Debit Notes Payable 60,000 Credit Cash 60,200
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