MARGIN OF SAFETY AND OPERATING LEVERAGE Agador Company produces a single product. The projected income statement for the coming year is as follows:

Sales (50,000 units @ $45) $2,250,000 Less: Variable costs 945,000 Contribution margin $1,305,000 Less: Fixed costs 916,650 Operating income $ 388,350

(Round all dollar answers to the nearest dollar. Round fractional answers to two significant digits.)

Required:

. Compute the break-even sales dollars.

. Compute the margin of safety in sales dollars.

. Compute the degree of operating leverage (rounded to two decimal places).

. Compute the new operating income if sales are 20 percent higher than expected.

(Round to the nearest dollar.)

Exercise