Question: Margin of Safety and Operating Leverage Espanola Company produces a single product. The projected income statement for the coming year is as follows:

Sales (53,000 units @ $36)          $2,250,000

Total variable cost                       1,305,000

    Contribution margin                $   945,000

Total fixed cost                             916,650

    Operating income                  $    28,350

Required: 1. Compute the break-even sales dollars.

2. Compute the margin of safety in sales dollars.

3. Compute the degree of operating leverage

4. Compute the new operating income if sales are 20 percent higher than expected.