Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question content area top Part 1 Edward's Repair Shop has a monthly target operating income of $ 2 5 comma 0 0 0 . Variable

image text in transcribed
Question content area top
Part 1
Edward's Repair Shop has a monthly target operating income of $ 25 comma 000. Variable expenses are 50% of sales, and monthly fixed expenses are $ 8 comma 500.Hint: The contribution margin ratio=100%- Variable expenses percentage of sales.
Read the requirementsLOADING....
Question content area bottom
Part 1
Requirement 1. Compute the monthly margin of safety in dollars if the shop achieves its income goal.
Begin by identifying the formula to compute the margin of safety.
-
=
Margin of safety in dollarsEdward's Repair Shop has a monthly target operating income of $25,000. Variable expenses are 50% of sales, and monthly fixed expenses are $8,500. Hint: The contribution margin ratio =100%- Variable expenses percentage of sales.
Read the requirements.
Requirement 1. Compute the monthly margin of safety in dollars if the shop achieves its income goal.
Begin by identifying the formula to compute the margin of safety.
Requirements
Compute the monthly margin of safety in dollars if the shop achieves its
income goal.
Express Edward's margin of safety as a percentage of target sales.
What is Edward's operating leverage factor at the target level of
operating income?
Assume that the company reaches its target. By what percentage will
the company's operating income fall if sales volume declines by 11%?
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

To solve the problem we need to find the margin of safety in dollars the margin of safety as a perce... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac

15th edition

1337272124, 978-1337515504, 1337515507, 978-1337272155, 978-1337272124

More Books

Students also viewed these Accounting questions

Question

Was the centralization of purchasing at Dashman necessary?

Answered: 1 week ago