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%.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 6CE
Related questions
Question
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%.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,