Margin of Safety and Operating Leverage

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

Sales (56,000 units @ $25.00)	$1,400,000
Total variable cost	868,000
Contribution margin	$ 532,000
Total fixed cost	513,000
Operating income	$ 19,000

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. $