On March 1, 2004, Seagram Co. CEO Edgar Bronfman, Jr., purchased Warner Music Group for $2.6 billion. The next day he fi red 1,000 salaried employees and reduced top executives’ salaries, slashing overhead costs by more than $250 million.

Required
a. What effect would these cuts have on Warner’s breakeven point? Explain.
b. What effect would these cuts have on Warner’s margin of safety? Explain.
c. What effect would these cuts have on Warner’s degree of operating leverage? Explain.