Question

Hopi Corporation expects the following operating results for next year: Sales $ 400,000 Margin of safety $ 100,000 Contribution margin ratio 75 % Degree of operating leverage 4 What is Hopi expecting total fixed expenses to be next year

Answer 1

Answer:

Hopi Corporation Total fixed expenses next year= $225,000

Step-by-step explanation:

Given,

Contribution margin ratio = 0.75

Current sales =  $400,000

Margin of Safety = $100,000

Breakeven sales can be calculated as,

Breakeven sales = Current Sales - Margin of safety

                            = $400,000 - $100,000

                            = $300,000

Fixed Expenses can be calculated as,

Fixed Expenses = Breakeven Sales × Contribution margin ratio

                           = $300,000 × 0.75

                           = $225,000

Answer: Expected total fixed expenses for Hopi next year is $225,000