Question

Espanola Company produces a single product. The projected income statement for the coming year is as follows:
Sales (50,000 units @ $45) ........ $2,250,000
Total variable cost ............ 1,305,000
Contribution margin ........... $945,000
Total fixed cost ............. 916,650
Operating income ............ $ 28,350

Required:
1. Compute the break-even sales dollars.
2. Compute the margin of safety in sales dollars.
3. Compute the degree of operating leverage (Note: Round answer to two decimal places).
4. Compute the new operating income if sales are 20 percent higher than expected.


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  • CreatedSeptember 22, 2015
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