Question

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Matthew's Fish Fry has a monthly target operating income of $7,900. Variable expenses are 70% of sales and monthly fixed expenses are $1,290. What is the monthly margin of safety in dollars if the business achieves its operating income goal? O A. $21,443 B. $26,333 O C. $34,933 O D. $30,633

Answer 1

Question 1

Correct answer-------$26,333

Working

A	Contribution margin ratio	30%
B	Fixed cost	$          1,290
C=B/A	Break even sales	4300

.

A	Contribution margin ratio	30%
B	Fixed cost+ Desired profit	$          9,190
C=B/A	Actual sales	$        30,633

.

A	Actual sales	$        30,633
B	Break even sales	$          4,300
A-B	Margin of safety	$        26,333

.

Question 2

Correct answer-------$0.83

Working

Working		Cheeseburger	Hamburger		Total
A	Price	$                        2.75	$                       2.00
B	Variable Cost per unit	$                        2.25	$                       0.50
C = A - B	Contribution Margin	$                        0.50	$                       1.50
D	Product Mix	66.67%	33.33%		100.00%
E = C x D	Weighted Average Contribution Margin	$                        0.33	$                       0.50		$                   0.83