Calculating break even sales & degree of operating leverage

Degree of Operating Leverage. DynaLinear, Ltd., produces digital-to-analog converters for compact disk players used by radio stations and audio enthusiasts. It is contemplating an expansion into the moderately-priced home audio market by producing a CD player that would sell at a price of $300. The production of each CD player would require $100 in materials, and 3.75 hours of labor at the rate of $20 per hour for wages and fringe benefits plus variable overhead tied to labor. Energy, supervisory and other variable overhead costs would amount to $50 per unit. The accounting department has derived an allocated fixed overhead charge of $25 per CD player (at a projected volume of 14,000 units) to account for the expected increase in fixed costs.

A. What is DynaLinear's break even sales volume (in units) for home audio CD players?
B. Calculate the degree of operating leverage at a projected volume of 14,000 units and explain what the DOL means.

Solution Preview

A. What is DynaLinear's breakeven sales volume (in units) for home audio CD players?

Price of CD player=P=$300
Variable Cost per unit=V=Material Cost+ labor cost=100+3.75*20=$175
Fixed costs are allocated at $25 per unit on a projected volume ...

Solution Summary

Solution depicts the steps to find out break even sales volume and degree of operating leverage at the given activity level.

... describes the steps and formulas for calculating break-even point ... 10 Selling Price per bag 16000 bags Break even sales... b. Calculate the profit or loss on 12,000 ...

... describes the steps and formulas for calculating break-even point ... 10 Selling Price per bag 16000 bags Break even sales... b. Calculate the profit or loss on 12,000 ...

...Calculate incremental Contribution Margin ... The solution describes the steps for calculating contribution margin ... Costs $ 210,000 CM Ratio 70% Break-even $ 300,000 ...

... For example a manager who is calculating the decision to invest in an ATM technology that will save variable costs. ... d. Calculate the Break-even point in ...

... to reach the break-even point? c.) What is the degree of operating leverage for a production and sales level of $6,000 units for the firm? (Calculate to three ...

...Break even= =250000/.5 $ 500,000.00. b) calculate the degree of operating leverage at the expected first-year sales volume. Operating leverage is calculated by ...

... number of DVD's he must sell to break even ... 1. Find the operating breaking point in number of DVD's ... 2. Calculate the total operating costs at the breakeven volume ...

... (Calculate to three decimal places.) Degree of operating leverage... This post shows how to calculate break-even point , dollar sales volume, degree of ...

... for an actual company cannot be calculated using the ... A More General Approach to Calculating Break-Even" in ... Assume sales of $4 million before expansion and $5 ...