Unit sales 40,000 units

Selling price per unit $20 per unit

Variable expenses per unit $14 per unit

Fixed expenses $180,000

(a) What is the break-even in dollar sales?

$600,000

(b) What is the margin of safety percentage?

25%

(c) What is the degree of operating leverage?

d)Using the degree of operating leverage and without changing anything in your worksheet, calculate the percentage change in net operating income if unit sales increase by 20%.

Confirm your calculations in Requirement above by increasing the unit sales in your worksheet by 20% so that the Data area looks like this:

Unit sales 48,000 units

Selling price per unit $20per unit

Variable expenses per unit $14 per unit

Fixed expenses $180,000

(a) What is net operating income?

b) By what percentage did the net operating income increase?