Boston Motors is a small car dealership. On average, it sells a car for $26,000, which it purchases from the manufacturer for $22,000. Each month, Boston Motors pays $65,000 in rent and utilities and $71,000 for salespeople's 

salaries. In addition to their salaries, salespeople are paid a commission of $500 for each car they sell. Boston Motors also spends $11,000 each month for local advertisements. Its tax rate is 40%.

 

Required:Please show your calculation!

(1) How many cars must Boston Motors sell each month to break even?

(2) Boston Motors has a target monthly net income of $52,500. What is its target monthly operating income? How many cars must be sold each month to reach the target monthly net income of $52,500?

(3) Assume budgeted sales in unit is 70 cars. What is the margin of safety inrevenues?