Calculate decree of leverage for unit output levels.
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If an output level is 14,000 units the degree of operating leverage= 1.45 (round to 6 decimal places) , and the OCF= 19,600 but if:
a. output rises to 16,000 units the DOL will be ?
b. output falls to 13,500 units the DOL will be?
i did DOL= 1 + FC / OCF
1 + ? / 19,600 yet i do not know how to find the fixed costs.
for the same question yet with these numbers:
ouput=11,000units
DOL=3.15
OCF=24,200 a. if output rises to 12,500
b. if output falls to 9,500
DOL= 1 + FC / OCF
1 + ? / 24,200.
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Contribution = 19600 x 1.45 = 28420
Contribution margin = 28420/14000 = 2.03
Fixed cost = 28420 - 19600 = 8820
Thus DOL at 16000 units ...
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