The Poseidon Swim Company produces swim trunks. The average selling price for on

Question

The Poseidon Swim Company produces swim trunks. The average selling price for one of their swim trunks is $81.71. The variable cost per unit is $18.83. Poseidon Swim has average fixed costs per year of $6.475. Assume that current tevel of sales is 330 units. What will be the resulting percentage change in EBIT if they expect units sold to changes by 2.7 percent? (You should calculate the degree of operating leverage first) Wite the percentage sig in the units box Round the onswer to two decimat piaces ::Your Answer: nsswe units Save Page 5 of 5 Save Ail Responses Go to Submit Quiz

Explanation / Answer

Operating leverage= Cont./ EBIT

OL= 20750.4/ 14275.4 = 1.4535

So if the sales change by - 2.7% the EBIT will change by 1.4535* -2.7%= - 3.8745%

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