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    Break-Even & Operating Leverage

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    Can you please assist me with the following three questions -

    1- Describe how the break-even quantities and operating leverages are affected by the relationships between fixed and variable costs.
    2- Describe how expanding a company's division with the highest operating leverage would affect the company's risk position.
    3- Describe how a break-even calculation (based on different price levels) can affect your analysis, and use the notion of operating leverage to assess the risks and rewards associated with production level option.

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    https://brainmass.com/economics/output-and-costs/break-even-operating-leverage-49266

    Solution Preview

    ** Please see the attached file for the complete solution response **

    1- Describe how the break-even quantities and operating leverages are affected by the relationships between fixed and variable costs.

    In order to do this, we need to start with the formula for break-even and operating leverage.

    QBE = FC / (P - V)

    where QBE is the break even quantity, FC is the Fixed Cost, P is the price per unit and V is the variable cost per unit. We can say that given a level of fixed costs, QBE would reduce as the variable cost reduces and given a level of variable costs, QBE would increase as the fixed ...

    Solution Summary

    This solution explains the relationship between break-even and operating leverage.

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