Peggy’s Ribbon World makes award rosettes. Following is information about the company:
Variable cost per rosette———–$1.11
Sales price per rosette————–2.90
Total fixed costs per month——–879.00
1: Suppose Peggy’s would like to generate a profit of $750. Determine how many rosettes it must sell to achieve this target profit. (Round your intermediate calculations to 2 decimal places and final answer to next whole number.)
Target units:__________
2: If Peggy’s sells 1,070 rosettes, compute its margin of safety in units, margin of safety in dollars, and as a percentage of sales. (Round your intermediate calculations, break-even sales dollars and percentage answers to 2 decimal places. Round your margin of safety answer to the next whole number.)
Margin of safety (units):__________rosettes
Margin of safety in dollars:$__________
Percentage of sales:__________%
3: Calculate Peggy’s degree of operating leverage if it sells 1,070 rosettes. (Round your intermediate calculations to 2 decimal places and final answer to 4 decimal places.)
Degree of operating leverage:__________
4: Using the degree of operating leverage, calculate the change in Peggy’s profit if it raises the sales price of each rosette by $.40. (Assume costs do not change.) (Round your intermediate calculations and final answer to 4 decimal places. Omit the “%” sign in your response.)
Effect on profit:__________%