4-37 Algo Margin of Safety and Operating Leverage

Medina Company produces a single product. The projected income statement for the coming year is as follows:

Sales (60,000 units @ $23.00)$1,380,000Total variable cost345,000Contribution margin$ 1,035,000Total fixed cost1,000,500Operating income$ 34,500

Required:

1.Compute the break-even sales dollars.

$

2.Compute the margin of safety in sales dollars.

$

3.Compute the degree of operating leverage.

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

$