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Degree of operating leverage :sample question
of operating leverage.
2.Degree of financial leverage.
3.Degree of combined leverage.
4.Break-even point in units.
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The answer to Degree of operating leverage
leverage = $111,580/$63,760
Degree of operating leverage = 1.75
For Mech-Apple, the degree of operating leverage is:
Degree of operating leverage = Contribution margin/Net operating Income
Degree of operating leverage = $238,462/$63,760
Degree
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Break even point, degree of operating leverage,
174734 Break even point, degree of operating leverage, degree of financial leverage, and degree of combined leverage Use the following information to answer the next four questions:
Sales (30,000 units)
Variable Costs $150,000
100,800
Contribution
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Degree of operating leverage, degree of financial leverage, combined leverage, break-even point in units
Degree of operating leverage.
b. Degree of financial leverage.
c. Degree of combined leverage.
d. Break-even point in units. a. Degree of operating leverage = (Sales - variable cost)/EBIT
=(750000-210000)/270000=2.00
b.
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Break-even point and Degree of Leverage
What is the degree of operating leverage at 20,000 bags and at 25,000 bags? Why does the degree of operating leverage change as the quantity sold increases?
4.
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Calculating Operating, Financial & Combined Leverage
Calculate the degree of operating leverage at this output level.
b. Calculate the degree of financial leverage at this level of EBIT.
c. What is the degree of combined leverage? a.
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Degree of combined leverage
Degree of combined leverage = Degree of operating leverage * Degree of financial leverage
=1.42*1.32
= 1.8744 times
Interpretation: Degree of combined leverage indicates combined risk.
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CVP and leverage
steps to calculate BEP, profit, degree of operating leverage, degree of finance leverage and degree of combined leverage at given levels of output.
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Fastron, Inc.
Compute Fastron's degree of operating leverage.
Degree of operating leverage = q(p - v)
q(p - v) - FC
Degree of operating leverage = 60,000,000 - 60,000,000(0.40)
60,000,000 - 60,000,000(0.40) - 20,000,000
= 2.25x
b.
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Calculating BEP, operating and financial leverage
What is the degree of operating leverage at 20,000 bags and at 25,000 bags? Why does the degree of operating leverage change as the quantity sold increases?
d.