Question

**Margin of Safety**

Yellow Sticker Company’s variable expenses are 40% of sales. The company has monthly fixed expenses of $15,000 and sells each unit for $0.50. The monthly target operating income is $5,250.

a. What is the monthly margin of safety in dollars if Yellow Sticker Company achieves its operating income goal?

$ _____

b. What is the monthly margin of safety in units if Yellow Sticker Company achieves its operating income goal?

_____ units

Answer #1

Answer- a)- The monthly margin of safety in dollars if Yellow Sticker Company achieves its operating income goal = $8750.

Explanation- Monthly margin of safety in dollars = Total sales - Break even sales

= $33750-$25000

=$8750

Total sales in dollars= (Fixed cost+ Target profit)/Contribution margin ratio

= ($15000+$5250)/60%

= $33750

Where- Contribution margin ratio = 1-Variable cost ratio

= 1-.40

= .60 or 60%

Break even sales in dollars= Fixed cost/Contribution margin ratio

= $15000/60%

= $25000

b)- The monthly margin of safety in dollars if Yellow Sticker Company achieves its operating income goal = Margin of safety in dollars sales/ Selling price per unit

= $8750/$0.50 per unit

= 17500 units

John's Repair Shop has a monthly target operating income of
$35,000. Variables expenses are 50% of sales, and monthly fixed
expenses are $10,500.
1. Compute the monthly margin of safely in dollars if the shop
achieves its income goal.
2. Express John's margin of safety as a percentage of target
sales.
3. What is John's operating leverage factor at the target level
of operating income?
4. Assume that the company reaches its target. By what
percentage will the company's operating...

Robert's Repair Shop has a monthly target profit of $ 28000.
Variable costs are 80 % of sales, and monthly fixed costs are
$12000.
1. Compute the monthly margin of safety in dollars if the shop
achieves its income goal.
2. Express Robert's margin of safety as a percentage of target
sales.
3. Why would Robert's management want to know the shop's margin
of safety?

Menlo Company distributes a single product. The company’s sales
and expenses for last month follow:
Total
Per Unit
Sales
$
316,000
$
20
Variable
expenses
221,200
14
Contribution
margin
94,800
$
6
Fixed
expenses
78,000
Net operating
income
$
16,800
Required:
1. What is the monthly break-even point in unit sales and in
dollar sales?
Break Even Point in unit sales
Break
Even Point in dollar sales
2. Without resorting to computations, what is the total
contribution margin at...

Menlo Company distributes a single product. The company’s sales
and expenses for last month follow:
Total
Per Unit
Sales
$
302,000
$
20
Variable expenses
211,400
14
Contribution margin
90,600
$
6
Fixed expenses
73,200
Net operating income
$
17,400
Required:
1. What is the monthly break-even point in unit sales and in
dollar sales?
2. Without resorting to computations, what is the total
contribution margin at the break-even point?
3-a. How many units would have to be sold each...

SIMPLE manufactures and sells a single product. The company’s
sales and expenses for last quarter follow: Total Per Unit Sales
$600,000 $40 Less: Variable Expenses $420,000 $28 Contribution
Margin $180,000 $12 Less: Fixed Expenses $146,520 Net Operating
Income $33,480 Required: What is the monthly break-even point in
units sold and in sales dollars? Without resorting to computations,
calculate the total contribution margin at the break-even point.
How many units would have to be sold each quarter to earn a target...

Menlo Company distributes a single product. The company’s sales
and expenses for last month follow:
Total
Per Unit
Sales
$
604,000
$
40
Variable expenses
422,800
28
Contribution margin
181,200
$
12
Fixed expenses
154,800
Net operating income
$
26,400
Required:
1. What is the monthly break-even point in unit sales and in
dollar sales?
2. Without resorting to computations, what is the total
contribution margin at the break-even point?
3-a. How many units would have to be sold each...

QUESTION 2
SPI-K manufactures and sells a single product. The company’s
sales and expenses for last quarter follow:
Total
Per Unit
Sales
$600,000
$40
Less: Variable Expenses
$420,000
$28
Contribution Margin
$180,000
$12
Less: Fixed Expenses
$146,520
Net Operating Income
$33,480
Required:
What is the monthly break-even point in units sold and in sales
dollars?
Without resorting to computations, calculate the total
contribution margin at the break-even point.
How many units would have to be sold each quarter to earn...

Menlo Company distributes a single product. The company’s sales
and expenses for last month follow:
Total
Per Unit
Sales
$
600,000
$
40
Variable expenses
420,000
28
Contribution margin
180,000
$
12
Fixed expenses
148,800
Net operating income
$
31,200
Required:
1.
What is the monthly break-even point in unit sales and in
dollar sales?
2.
Without resorting to computations, what is the total
contribution margin at the break-even point?
3-a.
How...

Menlo Company distributes a single product. The company’s sales
and expenses for last month follow:
Total
Per Unit
Sales
$
310,000
$
20
Variable expenses
217,000
14
Contribution margin
93,000
$
6
Fixed expenses
73,200
Net operating income
$
19,800
Required:
1. What is the monthly break-even point in unit sales and in
dollar sales?
2. Without resorting to computations, what is the total
contribution margin at the break-even point?
3-a. How many units would have to be sold each...

Menlo Company distributes a single product. The company’s sales
and expenses for last month follow: Total Per Unit Sales $ 300,000
$ 20 Variable expenses 210,000 14 Contribution margin 90,000 $ 6
Fixed expenses 77,400 Net operating income $ 12,600 Required: 1.
What is the monthly break-even point in unit sales and in dollar
sales? 2. Without resorting to computations, what is the total
contribution margin at the break-even point? 3-a. How many units
would have to be sold each...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 4 minutes ago

asked 7 minutes ago

asked 7 minutes ago

asked 10 minutes ago

asked 16 minutes ago

asked 18 minutes ago

asked 22 minutes ago

asked 22 minutes ago

asked 33 minutes ago

asked 41 minutes ago

asked 54 minutes ago

asked 1 hour ago