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?

Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter7: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 59P: Cost-Volume-Profit, Margin of Safety Victoria Company produces a single product. Last years income...
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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

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