Foster's Repair ShopFoster's Repair Shop

has a monthly target operating income of

$50,000.

Variable expenses are

75%

of sales, and monthly fixed expenses are

$11,000.

Read the requirements

1.

Compute the monthly margin of safety in dollars if the shop achieves its income goal.

2.

Express

FosterFoster's

margin of safety as a percentage of target sales.

3.

What is

FosterFoster's

operating leverage factor at the target level of operating income?

4.

Assume that the company reaches its target. By what percentage will the company's operating income fall if sales volume declines by

10%?