Question: Margin of Safety and Operating Leverage Espanola Company produces a single product. The projected income statement for the coming year is as follows:
Sales (53,000 units @ $36) $2,250,000
Total variable cost 1,305,000
Contribution margin $ 945,000
Total fixed cost 916,650
Operating income $ 28,350
Required: 1. Compute the break-even sales dollars.
2. Compute the margin of safety in sales dollars.
3. Compute the degree of operating leverage
4. Compute the new operating income if sales are 20 percent higher than expected.