What is the impact on the margin of safety

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Problem -

1. Suppose a men's clothing store sells two brands of suits: designer suits with a contribution margin of $600 each and regular suits with a contribution margin of $500 each. At breakeven, the store must sell a total of 100 suits a month. Last month, the store sold 100 suits in total but incurred an operating loss. There was no change in fixed cost, variable cost, or price. What happened?

2. A company sells two products. Product A has a contribution margin of $10, and Product B has a contribution margin of $15. The break-even point is 1,000 units of Product A and 500 units of Product B. Then total fixed costs increase. What will happen to the break-even points of Products A and B?

3. Two companies have identical sales revenue of $15 million. Is it true that both have the same operating income and the same margin of safety? Is it possible that one company has a higher margin of safety?

4. A company's margin of safety is $30,000. For the coming year, sales are expected to decrease by $14,000. What is the impact on the margin of safety?

Reference no: EM132871568

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