Nates Repair Shop has a monthly target operating income of $13,500. Variable expenses are 80% of sales,
Question:
Nate’s Repair Shop has a monthly target operating income of $13,500. Variable expenses are 80% 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 Nate’s margin of safety as a percentage of target sales.
3. What is Nate’s operating leverage factor at the target level of operating income?
4. Assume that Nate reaches his target. By what percentage will his operating income fall if sales volume declines by 9%?
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Step by Step Answer:
Solution Given Target operating income 13500 Variable expenses 80 of sales Fixed expenses 10000 Cont...View the full answer
Answered By
John Kimani
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ISBN: 9780135443446
4th Canadian Edition
Authors: Karen Braun, Wendy Tietz, Louis Beaubien
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