Computing margin of safetyRobbie’s Repair Shop has a monthly target profit of $31,000. Variable costs are 20% of Sales, and monthly fixed costs are $19,000.RequirementsCompute the monthly margin of Safety in dollars if the shop achieves its income goal.Express Robbie’s margin of safety, as a percentage of margin Sales.Why would Robbie’s management want to know the shop’s margin of safety?

1. Contribution Margin = Fixed costs + Profit(target) = $19,000 + $31,000 = $50,000 2. Contribution…

Answered: Computing margin of safety Robbie’s…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Computing margin of safety

Robbie’s Repair Shop has a monthly target profit of $31,000. Variable costs are 20% of Sales, and monthly fixed costs are $19,000.

Requirements

Compute the monthly margin of Safety in dollars if the shop achieves its income goal.
Express Robbie’s margin of safety, as a percentage of margin Sales.
Why would Robbie’s management want to know the shop’s margin of safety?

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