Below is an income statement for XYZ Company: Sales...
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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?
$65,000
$70,000
$75,000
$80,000
$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
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