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