Multiple Choice
Which of the following would decrease net sales on a company's income statement?
18
views
4. Merchandising Operations
Net Sales
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
How do managers use break-even analysis in relation to net sales?
A
To allocate indirect costs among different departments.
B
To calculate the total assets required for a fiscal year.
C
To estimate the depreciation expense for long-term assets.
D
To determine the level of net sales needed to cover all fixed and variable costs.
Verified step by step guidance1
Understand the concept of break-even analysis: Break-even analysis is a financial tool used to determine the point at which total revenues equal total costs (both fixed and variable). At this point, there is no profit or loss.
Identify the components of break-even analysis: Fixed costs (costs that do not change with sales volume), variable costs (costs that change with sales volume), and net sales (total revenue generated from selling goods or services).
Use the break-even formula: The formula for break-even sales is \( \text{Break-even Sales} = \frac{\text{Fixed Costs}}{1 - \text{Variable Cost Ratio}} \), where \( \text{Variable Cost Ratio} = \frac{\text{Variable Costs}}{\text{Net Sales}} \).
Apply the formula to determine the level of net sales needed: Managers use this formula to calculate the minimum net sales required to cover all fixed and variable costs, ensuring the business operates without incurring a loss.
Interpret the results for decision-making: Once the break-even sales level is determined, managers can use this information to set sales targets, evaluate pricing strategies, and assess the financial viability of projects or departments.
9:04mWatch next
Master Net Sales:Sales Discounts (Gross Method) with a bite sized video explanation from Brian
Start learningRelated Videos
Related Practice
