Managerial Finance Question
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Sales (30,000 units) $150,000
Variable costs 100,800
Contributions margin $ 49,200
Fixed manufacturing costs 24,000
Operating Income $ 25,200
Interest 18,000
Earnings Before Taxes $ 7,200
Taxes (30%) 2,160
Net Income $ 5,040
Shares Outstanding 600
This firm's break-even point is:
A) 4,800 units
B) 14,634 units
C) 7,142 units
D) 18,000 units
The Degree of Operating Leverage (DOL) is
A) 1.58x
B) 1.95x
C) 3.50x
D) 1.40x
The Degree of Financial Leverage (DFL) is
A) 3.50x
B) 1.40x
C) 1.95x
D) 1.58x
The Degree of Combined Leverage (D.C.L.) is
A) 3.08x
B) 5.45x
C) 2.73x
D) 6.83x
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Solution Summary
This solution is comprised of a detailed explanation and calculation to calculate breakeven point, degree of operating leverage, financial leverage, and combined leverage.
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This firm's break-even point is
A) 4,800 units
B) 14,634 units
C) 7,142 units
D) 18,000 units
Breakeven point = Fixed manufacturing costs/Contribution Margin per unit
= 24,000/(49,200/30,000)
= 14,634 units
The Degree of Operating Leverage (DOL) ...
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