Wally Repair Shop has a monthly target operating income of $30,000. Variable expenses are 40% of sales, and monthly fixed expenses are $7,500. Read the requirements

1.	Compute the monthly margin of safety in dollars if the shop achieves its income goal.
2.	Express Wally's margin of safety as a percentage of target sales.
3.	What is Wally's operating leverage factor at the target level of operating income?
4.	Assume that the company reaches its target. By what percentage will the company's operating income fall if sales volume declines by 12%?

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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.

(Breakeven sales in dollars, Contribution margin ratio, Fixed expenses, Targeting operating income, target sales in dollar, Variable expanses)

subtract

(Breakeven sales in dollars, Contribution margin ratio, Fixed expenses, Targeting operating income, target sales in dollar, Variable expanses)

= Margin Safety in Dollars

(Round intermediate calculations up to the nearest whole dollar and your final answer to the nearest whole dollar.)

The margin of safety is _______%

Requirement 2. Express Wally's margin of safety as a percentage of target sales. Begin by identifying the formula to compute the margin of safety as a percentage of target sales.

(Breakeven sales in dollars, Contribution margin ratio, Fixed expenses, Targeting operating income, target sales in dollar, Variable expanses)

Divided by

(Breakeven sales in dollars, Contribution margin ratio, Fixed expenses, Targeting operating income, target sales in dollar, Variable expanses)

= Margin of Safety Percentage

(Round the percentage to the nearest whole percent.)

The margin of safety percentage is

% of target sales.

Requirement 3. What is Wally's operating leverage factor at the target level of operating income? Begin by identifying the formula to compute the operating leverage factor at the target level of operating income.

(Contribution margin per unit, Fixed Cost, Operating income, Sales Price, Total Variable, Variable cost)

Divided by

(Contribution margin per unit, Fixed Cost, Operating income, Sales Price, Total Variable, Variable cost)

= Operating Leverage Factor

(Round your answer to two decimal places.)

The operating leverage factor is _______

Requirement 4. Assume that the company reaches its target. By what percentage will the company's operating income fall if sales volume declines by 12%?

(Round your answer to two decimal places, XX.XX%.)

If volume decreases 12%, operating income will decrease ________