Margin of Safety (10 points)

McAllister Corporation has provided the following data concerning its only product: Selling price: $150 per unit Current sales: 39,900 units Break-even sales: 31,521 units

Compute the margin of safety in both dollars and as a percentage of sales.

Degree of Operating Leverage (10 points)

Mahaxay Corporation has provided its contribution format income statement for April:

Sales $201,600

Variable expenses $129,600

Contribution margin $72,000

Fixed expenses $63,600

Net operating income $8,400

A. Compute the degree of operating leverage to two decimal places.

B. Using the degree of operating leverage, estimate the percentage change in net operating income that should result from a 9% increase in sales.

C. Using your answer from b above, compute operating income with a 9% increase in sales.