Margin of Safety and Operating Leverage

Medina Company produces a single product. The projected income statement for the coming year is as follows:

Sales (62,000 units @ $21.00)	$1,302,000
Total variable cost	820,260
Contribution margin	$ 481,740
Total fixed cost	466,200
Operating income	$ 15,540

Required:

1. Compute the break-even sales dollars. $

2. Compute the margin of safety in sales dollars. $

3. Compute the degree of operating leverage.

4. Compute the new operating income if sales are 20% higher than expected. $