Chapter 20: Q8RQ (page 1119)
A chain of convenience stores has one manager per store who is paid a monthly salary. Relative to the number of stores, is the manager’s salary fixed or variable? Why?
The manager’s salary is a variable cost.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
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 target sales.
3. Why would Robbie’s management want to know the shop’s margin of safety?
Question: Computing contribution margin, units and required sales to break even, and units to achieve target profit
Compute the missing amounts for the following table.
A B C Sales price per unit \( 200 \) 4,000 $ 5,220 Variable costs per unit 80 1,000 2,088 Total fixed costs 73,200 660,000 3,758,400 Target profit 266,760 3,000,000 3,132,000 Calculate:
Contribution margin per unit
Contribution margin ratio
Required units to break even
Required sales dollars to break even
Required units to achieve target profit
A furniture manufacturer specializes in wood tables. The tables sell for \(100 per unit and incur \)40 per unit in variable costs. The company has \(6,000 in fixed costs per month. Calculate the breakeven point in units under each independent scenario.
14. Variable costs increase by \)10 per unit.
15. Fixed costs decrease by $600.
16. Sales price increases by 10%.
Why is the calculation to determine the target profit considered a variation of the breakeven calculation?
What is the margin of safety? What are the three ways it can be expressed?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
