Compute margin of safety and operating leverage Victor’s Repair Shop has a monthly target operating income of $20,000. Variable expenses are 60% of sales, and monthly fixed expenses are $12,000.

Requirements

1. Compute the monthly margin of safety in dollars if the shop achieves its income goal.

2. Express Victor’s margin of safety as a percentage of target sales.

3. What is Victor’s operating leverage factor at the target level of operating income?

4. Assume that the company reaches its target. By what percentage will the company’s operating income fall if sales volume declines by 12%?

Miko willingly admits that she is not an accountant by training. she is concerned that her balance sheet might not be correct. she has provided you with the following additional information. 1. the boat actually belongs to miko, not to skysong, inc.. however, because she thinks she might take customers out on the boat occasionally, she decided to list it as an asset of the company. to be consistent, she also listed as a liability of the corporation her personal loan that she took out at the bank to buy the boat. 2. the inventory was originally purchased for $27,500, but due to a surge in demand miko now thinks she could sell it for $39,600. she thought it would be best to record it at $39,600. 3. included in the accounts receivable balance is $11,000 that miko loaned to her brother 5 years ago. miko included this in the receivables of skysong, inc. so she wouldn’t forget that her brother owes her money. (b) provide a corrected balance sheet for skysong, inc.. (hint: to get the balance sheet to balance, adjust stockholders’ equity.) (list assets in order of liquidity.)