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What is the margin of safety for Jakarta and Maldives

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Reference no: EM132638546

Problem - Jakarta Company is a service firm with current service revenue of $500,000 and a 30% contribution margin. Its fixed costs are $60,000. Maldives Company has current sales of $6,660,000 and a 50% contribution margin. Its fixed costs are $2,164,500.

A. What is the margin of safety for Jakarta and Maldives? If required, round final answers to one decimal place.

B. Compare the margin of safety in dollars between the two companies. Which is stronger?

a. Maldives is stronger because its margin of safety is $2,331,000 whereas Jakarta's is $300,000.

b. Maldives is stronger because its margin of safety is $300,000 whereas Jakarta's is $2,331,000.

c. Jakarta is stronger because its margin of safety is $2,331,000 whereas Maldives's is $300,000.

d. Jakarta is stronger because its margin of safety is $300,000 whereas Maldives's is $2,331,000.

C. Compare the margin of safety in percentage between the two companies. Now, which one is stronger?

a. Maldives is stronger because its % margin of safety is 35.0% whereas Jakarta's is 60%.

b. Maldives is stronger because its % margin of safety is 50% whereas Jakarta's is 35.0%.

c. Jakarta is stronger because its % margin of safety is 35.0% whereas Maldives's is 60%.

d. Jakarta is stronger because its % margin of safety is 60% whereas Maldives's is 35.0%.

D. Compute the degree of operating leverage for both companies. If required, round final answers to two decimal places.

Reference no: EM132638546

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