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Trident Food Corporation

Trident Food Corporation generated th following income statement for the most recent fiscal year.
Trident December 31, 2008 Sales Revenue $150,000
Variable Cost of Sales (112,500)
Gross profit 37,500
Fixed Operating Cost 24,000
Net Operating Income (EBIT) 13,500
Interest (10,000)
Earnings Before Taxes 3,500
Taxes (40%) (1,400)
Net Income 2,100

Each item of inventory Trident Foods produces has a selling price of $20

What is the degree of operating leverage of Trident?

What is the degree of total leverage for Trident?

What is the operating breakeven point in sales units (Q) for Trident?

What is the financial breakeven point for Trident?

How many units of inventory must Trident sell if it wants to operate at its financial breakeven point ?

Solution Preview

Operating Leverage & Breakeven Point
Trident Food Corporation generated the following income statement for the most recent fiscal year.
Trident
December 31, 2008
Sales Revenue $150,000
Variable Cost of Sales (112,500)
Gross profit 37,500
Fixed Operating Cost 24,000
Net Operating Income (EBIT) 13,500
Interest (10,000)
Earnings Before Taxes ...

Solution Summary

This solution is comprised of a detailed explanation to answer what is the degree of operating leverage of Trident.

$2.19