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Question - Margin of Safety and Operating Leverage
Medina Company produces a single product. The projected income statement for the coming year is as follows:
Sales (62,750 units @ $60.50)
$3,796,375
Total variable cost
1,328,731
Contribution margin
$ 2,467,644
Total fixed cost
Operating income
$ 1,138,913
Required:
1. Compute the break-even sales dollars. If required, round your answer to nearest whole value.
2. Compute the margin of safety in sales dollars.
3. Compute the degree of operating leverage. Round your answer to two decimal places.
4. Compute the new operating income if sales are 20% higher than expected. Round intermediate calculations to two decimal places. Round your final answer to the nearest dollar.
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