Western Repair Shop has a monthly target operating income of $28,000.Variable expenses are 80% of sales and monthly fixed expenses are $9,400.

Requirements

1. Compute the monthly margin of safety in dollars if the shop achieves its income goal.

2. Express Western Repair Shop's margin of safety as a percentage of target sales.

3. What is Western Repair Shop's operating leverage factor at the target level of operating income?

4. Assume that the repair shop reaches its target. By what percentage willWestern Repair Shop's operating income fall if sales volume declines by

14%?