Calculating break even sales & degree of operating leverage
Not what you're looking for?
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.
Purchase this Solution
Solution Summary
Solution depicts the steps to find out break even sales volume and degree of operating leverage at the given activity level.
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 ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
- "Thank you"
- "Really great step by step solution"
- "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
- "Thanks Again! This is totally a great service!"
- "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.