Thad Morgan, a motorcycle enthusiast, has been exploring the possibility of relaunching the Western Hombre brand of cycle that was popular in the 1930s. The retro-look cycle would be sold for $14,000 and at that price, Thad estimates 600 units would be sold each year. The variable cost to produce and sell the cycles would be $9,800 per unit. The annual fixed cost would be $1,890,000.

a. What is the break-even in unit sales?
Break-even in unit sales
b.
What is the margin of safety in dollars (Omit the "$" sign in your response.)

Margin of safety in dollars $
c. What is the degree of operating leverage? (Round your answer to 2 decimal places.)
Degree of operating leverage

a. Break-even in units = 450 units

b. Margin of Safety in Dollars = 2,100,000

c. Degree of Operating Leverage = 4

Explanation:

a. Break-even in units = 1,890,000 / (14,000 - 9,800) = 450 units

b. Margin of Safety in Dollars = (600 - 450) * 14,000 = 2,100,000

   This calculates the amount by which Sales exceed the break-even level of sales.

c. Degree of Operating Leverage = (Sales - Variable cost) / (Sales - Variable Cost - Fixed Costs )

   Degree of Operating Leverage = (8400000 - 5880000) / (8400000 - 5880000 - 1890000) = 4

mcdonald's fast-food restaurants have a well-designed training program for all new employees. each new employee is supposed to learn how to perform standardized tasks required to maintain mcdonald's service quality. due to labor shortages in some areas, new employees begin work as soon as they are hired and do not receive any off-the-job training. this nonconformity to standards creates control loss.

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