Question

Sam's appliance outlet has variable expenses of 40% of sales. the manager reported monthly fixed expenses of $240,000. the monthly target operating income is $80,000. what is the monthly margin of safety in dollars if the manager at sam's appliance outlet achieves the operating income goal?

Answer 1

$133,333.33

Sales = OI + FE + VE
x = 80,000 +240,000 + 0.4x
0.6x = 320,000
x = 533,333.33

BEP = 400,000
Margin of safety = 533,333.33 - 400,000