Brooke Motors (BM) is a small car dealership. On average, it sells a car for $27,000, which it purchases from the manufacturer for $23,000. Each month, BM pays $48,200 in rent and utilities and $68,000 for salespeoples salaries. In addition to their salaries, salespeople are paid a commission of $600 for each car they sell. BM also spends $13,000 each month for local advertisements. Its tax rate is 40%.

Required:

1. How many cars must BM sell each month to break even?

2. BM has a target monthly net income of $51,000 after tax.

How many cars must be sold each month to reach the target

monthly net income ?

3.Compute the BM's margin of safety as a percentage.

1. The Express Banquet has two restaurants that are open 24 hrs a day. Fixed costs for the two restaurants together total $459,000 per year. Service varies from a cup of coffee to a full meal. The average sales check per customer is $8.50. The average cost of food and other variable costs for each customer is $3.40. The income tax rate is 30%. Target net income is $107,100.

Required:

1. Compute the revenues needed to earn the target net income.

2. How many customers are needed to break even?
3. Compute net income and degree of operating leverage, if the number of customers is 170,000.