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    pmarie05's Avatar
    pmarie05 Posts: 1, Reputation: 1
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    #1

    Nov 7, 2005, 03:03 PM
    Accounting Problem
    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's Avatar
    terryhong92 Posts: 2, Reputation: 1
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    #2

    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
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