Question

1. Suppose that depreciation expense is 3.000.000 $ and profit is 15.000.000 $. Contribution margin percentage is 60%. Breakeven revenue is 25.000.000 $. Under these conditions, what would be the profit margin?

a) 30%

b) 40%

c) 50%

d) 60%

e) Other:

2. Suppose that total fixed costs are 800.000 $ and the contribution margin percentage is 40%. What would be the degree of operating leverage in case a sales revenue of 3.000.000 $ is generated?

a) 2

b) 3

c) 4

d) 5

e) Other:

3. Suppose that total fixed costs are 800.000 $ and the contribution margin percentage is 40%. What would be the profit in case a sales revenue of 3.000.000 $ is generated?

a) 200.000 $

b) 300.000 $

c) 400.000 $

d) 500.000 $

e) Other:

Answer 1

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Answer 1
Particulars	Amount $
Profit	15,000,000.00
Contribution margin	60%
Margin of safety	25,000,000.00
Add: Breakeven revenue	25,000,000.00
Total revenue	50,000,000.00
Profit margin	30.00%
So answer is option c.
Answer 2	Present
Sales	3,000,000.00
Contribution margin @ 40%	1,200,000.00
Less: Fixed expenses	800,000.00
Net Operating income	400,000.00
Degree of operating leverage	3.00
So answer is option b.
Answer 3	Present
Sales	3,000,000.00
Contribution margin @ 40%	1,200,000.00
Less: Fixed expenses	800,000.00
Profit	400,000.00
So answer is option c.