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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

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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:__________%


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