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What number are you multiplying to get to the sales

Assignment Help Accounting Basics
Reference no: EM131785053

Based on the assumption that the number of shirts calculated in item 14 are made and sold during the first year of business, calculate the margin of safety (I understand that) part

Need help with this: operating leverage for the business. What do these figures tell you about how risky the business is?

I need to know where the numbers were derived from (sales numbers) because I am not getting the same answer. I thought I understood it but I don't.

1 Variable Cost 99600  
  Fixed cost 96600  
    Total Cost 196200  
       
  Cost of each unit 8.3  
     Number of T-shirt 23639 units
       
  Selling price per unit 20  
  Variable cost per unit 4.21  
    Contribution Margin 15.79  
       
  T- shirts needed for Target Profit of $25000  
       
              = (25000+96600)/15.79  
    7703 units
       
2 Break even point (Sales)    
          = (96600/15.79)*20    
    $122,382.71  
       
  Margin of Safety    
          = (23639*20)-122382.71    
    $350,388.38  
       
  Operating Leverage    
        = Contribution Margin/Net Operating Income  
    1.35  

(Sales- Variable cost)/(Sales - Variable cost-Fixed cost)

What number are you multiplying to get to the sales

Reference no: EM131785053

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