Break-even analysis and degree of operating leverage
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Hi there
I am trying to work out the 2 questions below, and after reading my test book on break-even analysis, I am having a problem with doing this either by the algebraic and graphical methods as there are no examples, as I have a number of similar question to go, I need an example answers to work through based on these question, could use please use these 2 questions and supply an answer to so that I can learn from this and any text that will help me understand the working out
Question ONE
Using the Data in the table below
a. Determine the company's break-even volume for this book in
i. Units
ii. Dollars Sales
b. Develop a break-even chart for the text
c. Determine the number of copies East must sell to earn a (operating) profit of $30,000 on this text.
d. Determine total (operating) profits at sales levels of
i. 3,000 units
ii. 5,500 units
iii. 10,000 units
Question TWO
Determine the degree of operating leverage (DOL) and give a economic inter-pretation of the valve at the following sales levels:
a. 3,000 units
b. 7,000 units
TABLE
East Publishing Company is doing an analysis of the proposed new finance test. The following data have been obtained
FIXED COSTS ( PER EDITION )
Development (reviews, class testing etc) $15,000
Copyediting $ 4, 000
Selling and promotion $ 7,500
Typesetting $23,000
TOTAL $50,000
Variable Costs ( per copy )
Printing and binding $6.65
Administrative costs $1.50
Salespeople's commission (2% of selling price)$ 0.55
Author's royalties (12% of selling price) $ 3.30
Bookstore discounts (20% of selling price) $ 5.50
Total $17.50
Projected selling price $27.50
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