Fast as Lightning is an oil change service drive-through that charges each customer $24.00 for an oil and filter change service. Fast as Lightning has found that it costs its business $15.00 per oil and filter change. Monthly fixed costs are $44,000; current sales are 8,000 services. a. Compute the breakeven sales in units. b. Compute the margin of safety in units and sales dollars. c. Compute the margin of safety as a percentage. d. Compute the operating leverage factor. e. Compute the percentage of operating income decline if sales fall by 18%.
Fast as Lightning is an oil change service drive-through that charges each customer $24.00 for an oil and filter change service. Fast as Lightning has found that it costs its business $15.00 per oil and filter change. Monthly fixed costs are $44,000; current sales are 8,000 services. a. Compute the breakeven sales in units. b. Compute the margin of safety in units and sales dollars. c. Compute the margin of safety as a percentage. d. Compute the operating leverage factor. e. Compute the percentage of operating income decline if sales fall by 18%.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Fast as Lightning is an oil change service drive-through that charges each customer $24.00 for an oil and filter change service. Fast as Lightning has found that it costs its business $15.00 per oil and filter change. Monthly fixed costs are $44,000; current sales are 8,000 services.
a. Compute the breakeven sales in units.
b. Compute the margin of safety in units and sales dollars.
c. Compute the margin of safety as a percentage.
d. Compute the operating leverage factor.
e. Compute the percentage of operating income decline if sales fall by 18%.
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