Question

Variable expenses percentage of ases. Pead the coquimenents. Requirement 1. Congote the monthly margin of salety in dollars if the shop achioves its income goal. Begin tyy identifying the formula to cempute the maryn of safesy Requirements 1. Compute the monthiy margin of safety in dallars it the shop accioves its income goal. 2. Express Edwares margin of safety as a percentage of tarpet salea. 2. What is Edwards operating leverage factor at the target level of operating income? 4. Assume that the company reaches is larget. tiy what percentage wil the cempany's operating income fall if sales voluene decines by 11 s?

Answer 1

This question asks about margin of safety and operating leverage factor of a company.

Step-by-step explanation:

The question is asking about different requirements related to margin of safety and operating leverage factor of a company.

Requirement 1:

To compute the monthly margin of safety in dollars, you need to identify the formula. The formula to calculate the margin of safety is:

Margin of Safety = Actual Sales - Break-even Sales

Requirement 2:

To express Edward's margin of safety as a percentage of target sales, you can use the following formula:

Margin of Safety Percentage = (Margin of Safety / Target Sales) * 100%

Requirement 3:

Edward's operating leverage factor at the target level of operating income can be calculated using the formula:

Operating Leverage Factor = Contribution Margin / Operating Income

Requirement 4:

If the sales volume declines by 11%, the company's operating income will fall by that same percentage.