Dudley Calendars imprints calendars with college names. The company has fixed ­expenses of $ 1,125,000 each month plus variable expenses of $ 4.50 per carton of ­calendars. Of the variable expense, 74% is cost of goods sold, while the remaining 26% relates to variable operating expenses. The company sells each carton of calendars for $ 19.50.

Requirements

1. Compute the number of cartons of calendars that Dudley Calendars must sell each month to breakeven.

2. Compute the dollar amount of monthly sales Dudley Calendars needs in order to earn $ 338,000 in operating income (round the contribution margin ratio to two decimal places).

3. Prepare Dudley Calendar’s contribution margin income statement for June for sales of 475,000 cartons of calendars.

4. What is June’s margin of safety ( in dollars)? What is the operating leverage factor at this level of sales?

5. By what percentage will operating income change if July’s sales volume is 13% higher? Prove your answer.