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EXERCISE 4-7 Indifference Analysis [LOSl; Break-Even Analysis [L05l; Margin of Safety [LO07g1 James House is planning on starting a cleaning services business but has not

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EXERCISE 4-7 Indifference Analysis [LOSl; Break-Even Analysis [L05l; Margin of Safety [LO07g1 James House is planning on starting a cleaning services business but has not decided whether he should focus on residential clients or commercial clients. His estimates of revenue, variable expenses, and fixed expenses are shown below Page 121 Residential $25 per hour $15 per hour $500 per month Commercial Revenue Variable expense Fixed expense $35 per hour $20 per hour $825 per month Required 1. At what volume of hours per month will James be indifferent between focusing on residential versus commercial clients? 2. Calculate the number of break-even hours for residential clients and commercial clients 3. Assume that James decides to focus on commercial clients and his business is operating at 120 hours per month. Calculate the m argin of safety both in dollars and as a percentage of sales

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