Please, Can you answer the following 3 questions. 1. Winners Games reported sale
ID: 2653206 • Letter: P
Question
Please, Can you answer the following 3 questions.
1. Winners Games reported sales of $72,000 and net income totaling $12,000 during the year. It’s selling price is $6 per unit, its variable cost is $2 per unit, and its total fixed costs are $36,000. How much is the projected margin of safety?
a. $54,000
b. $66,000
c. $12,000
d. $18,000
2. What is a relevant cost?
a. It is a sunk cost.
b. It is a past cost.
c. It is a cost that differ across alternatives.
d. It is an opportunity cost.
3. True or False 1. A sunk cost is the potential benefit that may be obtained by following an alternative course of action.
Explanation / Answer
Q1 D $18,000 Sales 72,000.00 Sp per unit 6.00 VC per unit 2.00 Cont per unit(SP-VC) 4.00 Fixed Costs 36,000.00 Break even sales in $ = Fixed Costs*SP per unit/Cont per unit 54,000.00 Margin of Safety = Sales - Break even sales Margin of Safety = 72000 - 54000 =18000 Q2 C c. It is a cost that differ across alternatives. Relevant cost is the cost which is the cost of alternative. They are relevant in decision making, Relevant cost will be incurred only if the alternatie is undertaken. Q3 False Sunk cost is the cost that has already been incurred and is irrelevant in decision making since they have been incurred and acceptance/no acceptance of alternative will not change them.