Purchase Solution

Increase in profits, degree of operating leverage, confirm DOL change, break even

Not what you're looking for?

Ask Custom Question

A project has fixed costs of $1,000 per year, depreciation charges of $500 a year, revenue of $6,000 a year, and variable costs equal to two-thirds of revenues.

a. If sales increase by 5 percent, what will be the increase in pretax profits?
b. What is the degree of operating leverage of this project?
c. Confirm that the percentage change in profits equals DOL times the percentage change in sales.

Purchase this Solution

Solution Summary

In Excel, the solution includes all the calculations to arrive at answers.

Purchase this Solution

Free BrainMass Quizzes
Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.


This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce