Natasha’s Repair Shop has a monthly target operating income of $13,500. Variable expenses are 70% of sales, and monthly fixed expenses are $10,000.
Requirements
1. Compute the monthly margin of safety in dollars if the shop achieves its income goal.
2. Express Natasha’s margin of safety as a percentage of target sales.
3. What is Natasha’s operating leverage factor at the target level of operating income?
4. Assume that Natasha reaches her target. By what percentage will her operating income fall if sales volume declines by 9%?