At an output level of 18,000 units, you have calculated that the degree of opera

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At an output level of 18,000 units, you have calculated that the degree of operating leverage is 3.60. The operating cash flow is $65,000 in this case. Ignoring the effect of taxes, what are fixed costs? (Do not round intermediate calculations. Round your answer to the nearest whole number, e.g., 32.)

What will the operating cash flow be if output rises to 19,000 units? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

What will the operating cash flow be if output falls to 17,000 units? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

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At an output level of 18,000 units, you have calculated that the degree of operating leverage is 3.60. The operating cash flow is $65,000 in this case. Ignoring the effect of taxes, what are fixed costs? (Do not round intermediate calculations. Round your answer to the nearest whole number, e.g., 32.)

Explanation / Answer

operating leverage contribution EBIT Operating Leverage operating leverage = contribution/EBIT 3.6 234000 65000 Income statement contribution 234000 Fixed cost 169000 EBIT 65000 Contribution margin per unit contribution/no of units 13 If output increase to 19000 unit then EBIT contribution margin 19000 13 247000 Fixed cost 169000 EBIT 78000 If output decreases to 17000 then EBIT contribution margin 17000 13 221000 Fixed cost 169000 EBIT 52000

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