The following budget data apply to Newberry's Nutrition:

Direct labor workers are paid hourly wages and go home when there is no work. The marketing and administration costs include $50,000 that varies proportionately with production volume. Assume that sales and production volumes are equal.

REQUIRED

A. Compute the number of units that must be sold to achieve a target after-tax income of $120,000, assuming the tax rate is 40%.

B. Calculate the margin of safety in both revenues and units.

C. Calculate the degree of operating leverage.

Transcribed Image Text:

Sales (100,000 units) Costs $1,000,000 Direct materials Direct labor Fixed factory overhead Variable factory overhead Marketing and administration $300,000 200,000 100,000 150,000 160,000 Total costs 910,000 90,000 Budgeted pretax income