Hopi Corporation expects the following operating results for next year: What is Hopi expecting total fixed expenses to be next year?
A)$75,000
B)$100,000
C)$200,000
D)$225,000

Question

Hopi Corporation expects the following operating results for next year:  What is Hopi expecting total fixed expenses to be next year?
A)$75,000 
B)$100,000 
C)$200,000 
D)$225,000

Quizplus · Accepted Answer

Margin of safety in dollars = Total budgeted (or actual)sales - Break-even sales
$100,000 = $400,000 - Break-even sales
Break-even sales = $400,000 - $100,000 = $300,000
Dollar sales to break even = Fixed expenses ÷ CM ratio
$300,000 = Fixed expenses ÷ 0.75
Fixed expenses = $300,000 × 0.75 = $225,000

Hopi Corporation Expects the Following Operating Results for Next Year