Breakeven Level and Degree of Operating Leverage
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Tetrangle Manufacturing has fixed costs of $2,160 per day. The firm manufactures bicycle component upgrade kits. The kits have a short-run average variable cost of $48 and are sold for $66 each.
(a) What is the breakeven level of daily output for the firm?
(b) What is the degree of operating leverage when daily output is Q = 170?
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A complete, neat and step-by-step solution is provided, including a calculation for the break-even point and degree of operating leverage.
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(a) Daily revenue on selling x bicycles = 66x
Daily cost = 2160 + 48x
For break-even, ...
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