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 as a percentage of target sales in dollars?

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%
Break -even sales 18,750 (15,000 / .80)
Target sales 50,000
- Breakeven sales 18,750
Margin safety 31,250
% of Target sales 62.50% (31,250 / 50,000)

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