Homework Answers
| Contribution margin ratio = contribution margin/sale | |||||||
| contribution margin ratio = 781200/1260000 = 62% | |||||||
| 1) break even sales dollars = total fixed cost/contribution margin ratio | |||||||
| break even sales dollars = 755160/62% = 1218000 | |||||||
| 2) margin of safety = sale-break even sale | |||||||
| margin of safety = 1260000-1218000 = 42000 | |||||||
| 3) degree of operating leverage = contribution margin/operating income | |||||||
| degree of operating leverage = 781200/26040 = 30 | |||||||
| 4) operating income = 26040+(26040*20%*30) = 182280 |
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