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pmarie05
Nov 7, 2005, 03:03 PM
I need help with the following problem in Managerial Accounting:

Ronnie's repair shop has a monthly target operating income of $12,000. Variable expenses are 70% of sales, and monthly fixed expenses are $9000.

1. compute the monthly margin of safety in dollars if the shop achieves its income goal.

Where do I begin? I need help.

Thanks :o

terryhong92
Oct 9, 2007, 03:39 AM
Cost Rate
Total Sale ? 100%
Variable ? 70%
CM ? 30%
Fixed cost 9000
Net Income 12000

CM=9000+12000=21000

Cost Rate
Total Sale ? 100%
Variable ? 70%
CM 21000 30%
Fixed cost 9000

CM = Total Sale - Total Sale*Variable
21000 = TS - TS*0.7 <-----{70%}
21000 = 0.3TS
70000 = TS

therefor total sales is 70000 to obtain the profit of 12000