Problem
I. What is the difference between current ratio and quick ratio? Explain with an example.
II. Explain any two types of overheads with examples.
III. The following is Arkadia Corporation's contribution format income statement for last month:
|
Sales
|
$1,200,000
|
|
Less variable expenses
|
800,000
|
|
Contribution margin
|
400,000
|
|
Less fixed expenses
|
300,000
|
|
Net income
|
$100,000
|
The company has no beginning or ending inventories and produced and sold 20,000 units during the month.
Task
i. What is the company's contribution margin ratio?
ii. What is the company's break-even in units?
iii. If sales increase by 100 units, by how much should net income increase?
iv. How many units would the company have to sell to attain target profits of $125,000?
v. What is the company's margin of safety in dollars? ( 5* 2=10).