At an output level of 58,000 units, you have calculate that the degree of operat

Question

At an output level of 58,000 units, you have calculate that the degree of operating leverage is 1.60. Suppose fixed costs are dollar 120.000. What is the operating cash flow at dollar 52,000 units? (Do not round intermediate calculations and round your final answer to the nearest whole number, e.g. 32.) Operating cash flow dollar What is the new degree of operating leverage? (Do not round intermediate calculations and round your final answer to 3 decimal places, e.g., 32.161.) Degree of operating leverage

Explanation / Answer

Degree of operating leverage = Contribution / Contribution - Fixed costs

so, 1.60 = C / C - 120000

=> C = $320000 for output level of 58000 units

The Operating Cash Flow at the output level of 52000 units = 320000 * 52000 / 58000 = $286897

Degree of operating leverage at the output level of 52000 units =

D = $286897 / $286897 - 120000 = 1.72

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.