Meyer Appliance Company makes cooling fans. The firm's income statement is as follows: Sales ( 80,000u at
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Question:
Meyer Appliance Company makes cooling fans. The firm's income statement is as follows:
Sales ( 80,000u at $2/u) $160,000
Less: Variable Cost (80,000u at $0.80/u) 64,000
Fixed cost 60,000
Earnings Before Interest and Taxes 36,000
Interest 12,000
Earnings Before Taxes 24,000
Taxes (30%) 7,200
Earnings After Taxes 16,800
a) Break-Even point in units
b) Degree of Operating Leverage (DOL)
c) Degree of financial leverage ( DFL)
d) Degree of Combined Leverage ( DCL)
e) Cash Break-Even, if 15% of fixed cost is depreciation
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