Neeley Grocery has a monthly target operating income of $25,000.Variable expenses are 20% of sales and monthly fixed expenses are $15,000.What is the monthly margin of safety in dollars if the business achieves its operating income goal?

Question

Quizplus · Accepted Answer

B)
Fixed expenses 15,000
Target income 25,000
40,000
Contribution margin 80% (Variable expense of 20%)
Target sales 50,000
Fixed expense 15,000
Contribution margin 80%
Breakeven sales 18,750 (15,000 / .80)
Target sales 50,000
- Breakeven sales 18,750
Margin safety 31,250

Neeley Grocery Has a Monthly Target Operating Income of $25,000