..ooo AT&T; 10:03 AM cunyprod.blackboard.com 1. Calculate the breakeven sales le
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..ooo AT&T; 10:03 AM cunyprod.blackboard.com 1. Calculate the breakeven sales level and the Degree of Operating Leverage (DOL) if current Sales- $910,000; Total Variable Cost = $210,000; and Fixed Cost- $500,000. [S650,000; 3.5] 2. Based on the following information, calculate the breakeven level of sales (S*), Degree of Operation Leverage, Degree of Financial Leverage, and Degree of Combined Leverage. Quantity variable cost lunit Price/unit 40000 3.00 $ 53.00 Sales Variable Cost Fixed Cost EBIT $2,120,000.00 120,000.00 $1,000,000.00 1,000,000.00 Interest EBT Tax (40%) Net Income $ 600,000.00 $400,000.00 $ 160,000.00 240,000.00 Outstanding Shares 1,000,000 E.P.S 0.24 DEBT.15 $4,000,000.00 EQUITY (PAR= $1) $1,000,000.00Explanation / Answer
1 )
contribution margin ratio = Contribution /sales
= 700,000 / 910,000
= .7692
Break even point =Fixed cost /CM ratio
= 500,000 / .7692
= $ 650,026 (approx 650,000)
Degree of operating leverage = Contribution /net income
= 700,000 / 200,000
= 3.50
2) Contirbution margin ratio = (53-3)/53 = 50 / 53
= .9434
Break even point = Fixed cost / CM ratio
= 1,000,000 / .9434
= $ 1,059,995.76 (approx - 1,060,000)
2)Degree of operating leverage = Q(P-V) / Q(P-V)-F
= 40000(53 -3 ) /[ 40000(53-3) -1,000,000 ]
= 40000 *50 / [40000*50 -1,000,000]
= 2,000,000 / [2,000,000- 1,000,000]
= 2,000,000 /1,000,000
= 2
Degree of financial leverga = EBIT /EBIT-I
= 1,000,000 / (1,000,000 - 600,000)
= 1,000,000 / 400,000
= 2.5
Degree of combined leverage =DOL *DFL
= 2*2.5
= 5
sales 910000 less:Variable cost (210000) contribution 700000 less:Fixed cost (500000) net income 200000Related Questions
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