Shop has a monthly target operating income of $ 30,000. Variable expenses are 40% of sales, and

Question:

Shop has a monthly target operating income of $ 30,000. Variable expenses are 40% of sales, and monthly fixed expenses are $ 7,500.

Requirements
1. Compute the monthly margin of safety in dollars if the shop achieves its income goal.
2. Express Tom’s margin of safety as a percentage of target sales.
3. What is Tom’s operating leverage factor at the target level of operating income?
4. Assume that the company reaches its target. By what percentage will the company’s operating income fall if sales volume declines by 12%?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Managerial Accounting

ISBN: 978-0133428377

4th edition

Authors: Karen W. Braun, Wendy M. Tietz

Question Posted: