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How is cost-volume-profit analysis useful

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Question: 1. A company has fixed costs of $50,000 and a 25% contribution margin ratio. What dollar sales are necessary to achieve an after-tax net income of $120,000 if the tax rate is 20%? (a) $800,000, (b) $680,000, or (c) $600,000.

2. If a company's contribution margin ratio decreases from 50% to 25%, what can be said about the unit sales needed to achieve the same target income level?

3. What is a company's margin of safety?

4. How is cost-volume-profit analysis useful?

5. What is a variable cost? Identify two variable costs.

Reference no: EM131538870

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