Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Wally's Repair Shophas a monthly target operating income of $40,000. Variable expenses are 60% of sales, and monthly fixed expenses are $10,000. Hint: The contribution

Wally's Repair Shophas a monthly target operating income of $40,000. Variable expenses are 60% of sales, and monthly fixed expenses are

$10,000. Hint: The contribution margin ratio = 100% - Variable expenses percentage of sales.

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

7%?

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 dollars

Step by Step Solution

There are 3 Steps involved in it

Step: 1

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

Fundamental accounting principle

Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta

21st edition

1259119831, 9781259311703, 978-1259119835, 1259311708, 978-0078025587

More Books

Students also viewed these Accounting questions

Question

What is an interval estimator?

Answered: 1 week ago

Question

1 What theories are implicit in these reward systems?

Answered: 1 week ago