Based on the assumption that the number of shirts calculated in item 14 are made and sold during the first year of business, calculate the margin of safety (I understand that) part
Need help with this: operating leverage for the business. What do these figures tell you about how risky the business is?
I need to know where the numbers were derived from (sales numbers) because I am not getting the same answer. I thought I understood it but I don't.
| 1 |
Variable Cost |
99600 |
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Fixed cost |
96600 |
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Total Cost |
196200 |
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Cost of each unit |
8.3 |
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Number of T-shirt |
23639 |
units |
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Selling price per unit |
20 |
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Variable cost per unit |
4.21 |
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Contribution Margin |
15.79 |
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T- shirts needed for Target Profit of $25000 |
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= (25000+96600)/15.79 |
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7703 |
units |
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| 2 |
Break even point (Sales) |
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= (96600/15.79)*20 |
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$122,382.71 |
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Margin of Safety |
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= (23639*20)-122382.71 |
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$350,388.38 |
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Operating Leverage |
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= Contribution Margin/Net Operating Income |
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1.35 |
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(Sales- Variable cost)/(Sales - Variable cost-Fixed cost)
What number are you multiplying to get to the sales