A proposed project has fixed costs pf $100,000 per year. The operating cash flow
ID: 2711484 • Letter: A
Question
A proposed project has fixed costs pf $100,000 per year. The operating cash flow at 8,000 units is $89,000. Ignoring the effect of taxes, what is the degree of operating leverage? Round answer to 4 decimal places. If units sold rise from 8,000 to 8,500, what will be the new operating cash flow? Round answer to 2 decimal places. What is the new degree of operating leverage? Round answer to 4 decimal places. Please show steps. A proposed project has fixed costs pf $100,000 per year. The operating cash flow at 8,000 units is $89,000. Ignoring the effect of taxes, what is the degree of operating leverage? Round answer to 4 decimal places. If units sold rise from 8,000 to 8,500, what will be the new operating cash flow? Round answer to 2 decimal places. What is the new degree of operating leverage? Round answer to 4 decimal places. Please show steps.Explanation / Answer
Degree of operating leverage = Contribution margin / Operating Income
= ( 100000+89000)/89000
= 189000/89000 i.e 2.123596
Contribution per unit = 189000/8000 i.e 23.625
Contribution of 8500 units = 200812.50
Degree of operating leverage = Contribution margin / Operating income
= 200812.50/(200812.50-100000)
= 200812.50/100812.50 i.e 2
New degree of operating leverage = 2
Related Questions
Hire Me For All Your Tutoring Needs
Integrity-first tutoring: clear explanations, guidance, and feedback.
Drop an Email at
drjack9650@gmail.com
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.