Lynn Lin rented a cart in a mall to sell covers for cell phones and tablets. The

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Lynn Lin rented a cart in a mall to sell covers for cell phones and tablets. The mall charges $2,250 per month for rent, cart rental, and utilities. In addition, the mall takes 2% from the total revenue. Lynn decided to pay herself 18% commission based on sales. On average, the cost of the covers is 20% of the sales price. Lynn pays a tax rate of 20%.


REQUIRED

A. What is the break even in sales?
B. If Lynn would like to earn a net income equal to 12% of revenue for the next year, what should the annual sales be?
C. Based on the calculation from Part B, what is the margin of safety?
D. Calculate the degree of operating leverage based on the sales from Part B.
E. Interpret the degree of operating leverage.

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Related Book For  answer-question

Cost Management Measuring, Monitoring and Motivating Performance

ISBN: 978-1119185697

3rd Canadian edition

Authors: Leslie G. Eldenburg, Susan K. Wolcott, Liang Hsuan Chen, Gail Cook

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