Respuesta :
If the current operating income of Bay Area Cycles Co. is $28,000, the margin of safety would be $140,000, 20% is the contribution margin, and $112,000 is the fixed expense. required.
The revenue of a company less all variable costs, divided by the revenue, is the contribution margin ratio (CM ratio). It is an illustration of the marginal gain from generating an extra unit.
Contribution Margin is the sum of money left over after paying your company's fixed expenses. That is, it refers to the excess revenue that your company makes after removing the variable costs associated with producing your goods.
One crucial way for assessing, managing, and planning your company's operating income profitability is the calculation of the contribution margin.
A Operating Income $28,000
B Fixed expenses $112,000
C = A+B Total Contribution margin $140,000
D CM Ratio 20%
E = C/D Total Sales dollars $700,000
F Break even dollars $560,000
G = E - F Margin of Safety $140,000
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