7. ABC Company is considering to discontinue a certain product line if it does not have a margin
of safety higher than 15%. The break even sales is P 76,800 and the margin of safety is P 13,200.
Based on this information , the controller has recommended that ABC keep its product line.
8. Larger Company has originally expected to earn operating income of P 130,000 in the coming
year. Its degree of operating leverage is 2.4. Recently. Larger revised its plan and now expects to
increase sales of 20% by next year.
a. What is the percentage change in operating income exected by Larger in the coming year?
b. What will be Larger's expected operating income in the coming year?