Margin of Safety and Operating Leverage

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

Sales (68,000 units @ $17.00)	$1,156,000
Total variable cost	323,680
Contribution margin	$ 832,320
Total fixed cost	807,840
Operating income	$ 24,480

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. $