Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger

Exercise 10

Cost-Volume-Profit, Margin of Safety
Abraham Company had revenues of $830,000 last year with total variable costs of $647,400 and fixed costs of $110,000.
Required:
1. What is the variable cost ratio for Abraham? What is the contribution margin ratio?
2. What is the break-even point in sales revenue?
3. What was the margin of safety for Abraham last year?
4. CONCEPTUAL CONNECTION Abraham is considering starting a multimedia advertising campaign that is supposed to increase sales by $12,000 per year. The campaign will cost $4,500. Is the advertising campaign a good idea? Explain.