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Please tell me if my working and answers are correct. Thanks! Stuart Company manufactures a single product. Each unit sells for $15. The firm's projected
Please tell me if my working and answers are correct. Thanks! Stuart Company manufactures a single product. Each unit sells for $15. The firm's projected costs are listed below: $5 $1 Variable costs per unit: Production SGRA Fixed costs: Production SG&A Estimated volume $40,000 $60,000 20,000 units a) What is Stuart's projected margin of safety for the current year? Working Current Sales = 15x20,000 = $300,000 Fixed Cost = 40,000+60,000 - $100,000 Contribution Margin per unit = 15-5-1 = $9 per unit Breakeven units = 100,000/9 = 11,112 Breakeven sales = 11.112x15 = $166,680 Margin of Safety = 300,000-166,680 = $133,320 b) What is Stuart's projected degree of operating leverage for the current year? Working: Degree of Operating Leverage = (300,000-20,000x(5+1)/(300,000-20,000x(5+1)-100,000) = 2.25
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