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# degree of operating leverage

Southcoast Oil's fixed costs are \$2,500,000 and its debt repayment requirements are \$1,000,000. Selling price per barrel of oil is \$18 and variable costs per barrel are \$10.

(a) Determine the breakeven output (in dollars).

(b) Determine the number of barrels of oil that offshore must produce and sell in order to earn a target (operating) profit of \$1,500,000.

(c) Determine the degree of operating leverage at an output of 400,000 barrels.

(d) Assuming that sales of oil are normally distributed with a mean of 362,500 barrels and a standard deviation of 100,000 barrels, determine the probability that Southcoast will incur an operating loss.

Note: Part (d) requires the use of statistical tables.

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I need to see the work for this so I know how to do these problems in the future - thanks.

Southcoast Oil's fixed costs are \$2,500,000 and its debt repayment requirements are \$1,000,000. Selling price per barrel of oil is \$18 and variable costs per barrel are \$10.

(a) Determine the breakeven output (in dollars).

(b) Determine the number of barrels of oil that offshore must produce and sell in order to earn ...

#### Solution Summary

This posting offers help with calculating degree of operating leverage.

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