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XYZ Company produces and sells a single product. The company's income statement for the most recent month is given below: Sales (6,000 units at
XYZ Company produces and sells a single product. The company's income statement for the most recent month is given below: Sales (6,000 units at $40 per unit) Less manufacturing costs: 240,000 Direct Materials 48,000 Direct Labor Variable factory Overhead Fixed factory Overhead 60,000 12,000 30,000 150,000 Gross margin 90,000 Less selling and other expenses: Variable selling and other expenses 24,000 Fixed selling and other expenses 42,000 66,000 Net Operating Income 24,000 There are no beginning or ending inventories. Required: (every solution needs to be done with formulas only, no numbers in formulas) a. Compute the company's monthly break-even point in units of product. b. Compute the margin of safety of the company as a dollar value and as a percentage. c. Compute the operating leverage of this company. d. What would the company's monthly net operating income be if sales increased by 25% and there is no change in total fixed expenses? e. Refer to base example: What dollar sales must the company achieve in order to earn a net operating income of $50,000 per month?
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