Question

John's Repair Shop has a monthly target operating income of $35,000. Variables expenses are 50% of...

John's Repair Shop has a monthly target operating income of $35,000. Variables expenses are 50% of sales, and monthly fixed expenses are $10,500.

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

2. Express John's margin of safety as a percentage of target sales.

3. What is John'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 8%?

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Robert's Repair Shop has a monthly target profit of $ 28000. Variable costs are 80 %...
Robert's Repair Shop has a monthly target profit of $ 28000. Variable costs are 80 % of​ sales, and monthly fixed costs are $12000. 1. Compute the monthly margin of safety in dollars if the shop achieves its income goal. 2. Express Robert's margin of safety as a percentage of target sales. 3. Why would Robert's management want to know the​ shop's margin of​ safety?
Margin of Safety Yellow Sticker Company’s variable expenses are 40% of sales. The company has monthly...
Margin of Safety Yellow Sticker Company’s variable expenses are 40% of sales. The company has monthly fixed expenses of $15,000 and sells each unit for $0.50. The monthly target operating income is $5,250. a.  What is the monthly margin of safety in dollars if Yellow Sticker Company achieves its operating income goal? $ _____ b.  What is the monthly margin of safety in units if Yellow Sticker Company achieves its operating income goal? _____ units
Crane Corporation has collected the following information after its first year of sales. Sales were $1,600,000...
Crane Corporation has collected the following information after its first year of sales. Sales were $1,600,000 on 100,000 units, selling expenses $240,000 (40% variable and 60% fixed), direct materials $514,000, direct labor $270,800, administrative expenses $280,000 (20% variable and 80% fixed), and manufacturing overhead $376,000 (70% variable and 30% fixed). Top management has asked you to do a CVP analysis so that it can make plans for the coming year. It has projected that unit sales will increase by 10%...
Break-Even in Units, Target Income, New Unit Variable Cost, Degree of Operating Leverage, Percent Change in...
Break-Even in Units, Target Income, New Unit Variable Cost, Degree of Operating Leverage, Percent Change in Operating Income Reagan, Inc., has developed a chew-proof dog bed—the Tuff-Pup. Fixed costs are $224,000 per year. The average price for the Tuff-Pup is $37, and the average variable cost is $23 per unit. Currently, Reagan produces and sells 20,000 Tuff-Pups annually. Required: 1. How many Tuff-Pups must be sold to break even? units 2. If Reagan wants to earn $79,800 in profit, how...
Angie Silva has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes in...
Angie Silva has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes in fashionable sandals. In time, she hopes to open a chain of sandal shops. As a first step, she has gathered the following data for her new store: Sales price per pair of sandals $ 40 Variable expenses per pair of sandals 20 Contribution margin per pair of sandals $ 20 Fixed expenses per year: Building rental $ 10,000 Equipment depreciation 8,000 Selling 8,000 Administrative...
Morton Company’s contribution format income statement for last month is given below: Sales (15,000 units ×...
Morton Company’s contribution format income statement for last month is given below: Sales (15,000 units × $30 per unit) $ 450,000 Variable expenses 315,000 Contribution margin 135,000 Fixed expenses 90,000 Net operating income $ 45,000 The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits....
1- Costs for direct materials, direct labor and manufacturing overhead are assigned to each job. True...
1- Costs for direct materials, direct labor and manufacturing overhead are assigned to each job. True or false 2- J&A Corporation has a monthly target operating income of $35,000. Variable expenses are 30% of sales and monthly fixed expenses are $7,000. What is the monthly margin of safety in dollars if the business achieves its operating income goal? A) $60,000 B) $70,000 C) $50,000 D) $21,000 3- At Dwight Incorporated, total fixed and variable costs are $430,000 at a production...
Carroll Corporation has two products, Q and P. During June, the company's net operating income was...
Carroll Corporation has two products, Q and P. During June, the company's net operating income was $28,000, and the common fixed expenses were $60,000. The contribution margin ratio for Product Q was 40%, its sales were $145,000, and its segment margin was $52,000. If the contribution margin for Product P was $50,000, the segment margin for Product P was: Multiple Choice $8,000 $52,000 $36,000 $88,000 *********************************************************** Krepps Corporation produces a single product. Last year, Krepps manufactured 34,060 units and sold...
Problem 18-5A Mozena Corporation has collected the following information after its first year of sales. Sales...
Problem 18-5A Mozena Corporation has collected the following information after its first year of sales. Sales were $1,500,000 on 100,000 units; selling expenses $250,000 (40% variable and 60% fixed); direct materials $511,000; direct labor $290,000; administrative expenses $270,000 (20% variable and 80% fixed); manufacturing overhead $350,000 (70% variable and 30% fixed). Top management has asked you to do a CVP analysis so that it can make plans for the coming year. It has projected that unit sales will increase by...
Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been...
Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below:    Sales (13,400 units × $20 per unit) $ 268,000 Variable expenses 134,000 Contribution margin 134,000 Fixed expenses 149,000 Net operating loss $ (15,000 ) Required: 1. Compute the company’s CM ratio and its break-even point in unit sales and dollar sales. 2. The...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT