E$6-12($Algo$)$ Calculating Target Profit, Margin of Safety, Degree of Operating Leverage $[$LO $6-2,6-3,6-4,6-5]$

Dana$$s Ribbon World makes award rosettes. Following is information about the company:

Variable cost per rosette $ $2\mathrm{.}20$

Sales price per rosette $5\mathrm{.}00$

Total fixed costs per month $1400\mathrm{.}00$

Required:

Suppose Dana$$s would like to generate a profit of $$1,040.$ Determine how many rosettes it must sell to achieve this target profit.

If Dana$$s sells $1,540$ rosettes, compute its margin of safety in units, in sales dollars, and as a percentage of sales.

Calculate Dana$$s degree of operating leverage if it sells $1,540$ rosettes.

Using the degree of operating leverage, calculate the percentage change in Dana$$s profit if unit sales drop to $1,155$ units.

Prepare a new contribution margin income statement to verify change in Dana's profit.