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Heavenly Cupcakes has a monthly target operating income of $12,000

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Heavenly Cupcakes has a monthly target operating income of $12,000. Variable expenses are 40% of sales and monthly fixed expenses are $8,000.

Requirements:

a.     What is the monthly margin of safety in dollars if the business achieves its operating income goal?

b.     What is the monthly margin of safety as a percentage of target sales in dollars?

c.     What is Heavenly Cupcakes' operating leverage factor at the target level of operating income?