Happy Feet hiking socks have variable cost of $6 per pair which are then sold for $10 per pair. Monthly fixed costs are $18,000; current sales are 12,000 pairs per month.
Required:
1. Compute the break-even sales in units.
2. Compute ABC's margin of safety in units and sales dollars.
3. Compute ABC's margin of safety as a percentage.
4. Compute ABC's operating leverage factor.
5. Compute ABC's % of operating income decline if sales fall by 20%.

Question

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The Answer of Happy Feet hiking socks have variable cost of $6 per pair which are then sold for $10 per pair. Monthly fixed costs are $18,000; current sales are 12,000 pairs per month.
Required:
1. Compute the break-even sales in units.
2. Compute ABC's margin of safety in units and sales dollars.
3. Compute ABC's margin of safety as a percentage.
4. Compute ABC's operating leverage factor.
5. Compute ABC's % of operating income decline if sales fall by 20%.

Happy Feet Hiking Socks Have Variable Cost of $6 Per