Explore BrainMass

Explore BrainMass

    Break-even analysis and degree of operating leverage

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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

    © BrainMass Inc. brainmass.com June 3, 2020, 6:42 pm ad1c9bdddf
    https://brainmass.com/business/business-and-industry-analysis/break-even-analysis-and-degree-of-operating-leverage-71232

    Attachments

    Solution Summary

    A Break-even analysis and degree of operating leverage are featured.

    $2.19

    ADVERTISEMENT