Question - Algo Margin of Safety and Operating Leverage
Medina Company produces a single product. The projected income statement for the coming year is as follows:
Sales (60,000 units @ $23.00) $1,380,000
Total variable cost345,000
Contribution margin $ 1,035,000
Total fixed cost 1,000,500
Operating income $ 34,500
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% higher than expected.