Question

Translate M Gmail CengageNOW2... N Netflix UJIUNILULU Bunprogress=false - Norton Inuinitive Connect - To Do eBook Calculator Print item Jakarta Company is a service firm with current service revenue of $300,000 and a 40% contribution margin. Its fixed costs are $48,000. Maldives Company has current sales of $6,660,000 and a 50% contribution margin. Its fixed costs are $1.998,000. A. What is the margin of safety for Jakarta and Maldives? If required, round final answers to one decimal place. Margin of safety for Jakarta: % Margin of safety for Maldives: % B. Compare the margin of safety in dollars between the two companies. Which is stronger? a. Maldives is stronger because its margin of safety is $2,664,000 whereas Jakarta's is $180,000 b. Maldives is stronger because its margin of safety is $180,000 whereas Jakarta's is $2,664,000. c. Jakarta is stronger because its margin of safety is $2,664,000 whereas Maldives's $100.000 d. Jakarta is stronger because its margin of safety is $180,000 whereas Maldives's is $2,664,000 stronger C. Compare the margin of safety in percentage between the two companies. Now, which one a. Maldives is stronger because its margin of safety is 40.0% whereas Jakarta's is 60%. b. Maldives is stronger because its % margin of safety is 50% whereas Jakarta's is 40.0%. c. Jakarta is stronger because its margin of safety is 40.0% whereas Maldives's is 60%. d. Jakarta is stronger because its margin of safety is 60% whereas Maldives's is 40.0% D. Compute the degree of operating leverage for both companies. If required, round final answers to two decimal places. Operating leverage: Jakarta Maldives increase in sales Next Compare the degree of operating leverage for both companies which company will benefit most from a 20 Check My Work

Answer 1

	Jakarta	Maldives
Sales Revenue	$       300,000	$     6,660,000
Contribution Margin	$       120,000	$     3,330,000
Fixed Costs	$          48,000	$     1,998,000
Operating Income	$          72,000	$     1,332,000

Break even Sales = Fixed Costs / Contribution Margin Ratio
Jakarta = $48000 / 40% = $120000
Maldives = $1998000 / 50% = $3996000

Margin of Safety (%) = (Actual Sales - Break even sales) / Actual Sales
Jakarta = ($300000 - 120000) / 300000 = 60%
Maldives = ($6660000-3996000) / 6660000 = 40%

Degree of Operating Leverage = Contribution Margin / Net Operating Income
Jakarta = $120000 / 72000 = 1.67
Maldives = $3330000 / 1332000 = 2.5