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Margin of Safety and Operating Leverage
Medina Company produces a single product. The projected income statement for the coming year is as follows:
| Sales (66,000 units @ $19.00) | $1,254,000 |
| Total variable cost | 489,060 |
| Contribution margin | $ 764,940 |
| Total fixed cost | 741,760 |
| Operating income | $ 23,180 |
Required:
1. Compute the break-even sales dollars. $fill in the blank 1
2. Compute the margin of safety in sales dollars. $fill in the blank 2
3. Compute the degree of operating leverage. fill in the blank 3
4. Compute the new operating income if sales are 20% higher than expected. $fill in the blank 4
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