Purchase Solution

Finding break even point and degree of operating leverage

Not what you're looking for?

Ask Custom Question

Grey Products has fixed operating costs of $380,000, variable operating costs of $16 per unit, and a selling price of $63.50 per unit.
a. Calculate the operating break even point in units.
b. Calculate the firm's EBIT at 9,000, 10,000, and 11,000 units, respectively.
c. With 10,000 units as a base, what are the percentage changes in units sold and EBIT as sales move from the base to the other sales levels used in part b?
d. Use the percentages computed in part c to determine the degree of operating leverage (DOL).
e. Use the formula for degree of operating leverage to determine the DOL at 10,000 units.

Purchase this Solution

Solution Summary

Solution describes the steps to calculate break even point and degree of operating leverage.

Solution Preview

Please refer attached file for complete solution. Expressions typed with the help of equation writer are missing here.

Solution:

a. Calculate the operating break even point in units.
Break even point=Fixed cost/(Price-Variable cost)=380000/(63.5-16)=8000 units

b. Calculate the firm's EBIT at 9,000, 10,000, and 11,000 units, respectively.
At 9000 ...

Solution provided by:
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution


Free BrainMass Quizzes
Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

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.

Introduction to Finance

This quiz test introductory finance topics.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.