IS-2lA. (Break-even point and operating leverage) The Portland Recreation Company manufaclUres a full line of lawn furniture. The average selling price of a finished unit is $25. The associated variable cost is $15 per unit. Fixed costs for Portland average $50,000 per year.

a. What is the break-even point in units for the company?

b. What is the dollar sales volume the firm must achieve to reach the break-even point?

c.ı What would be the company's profit or loss at the following units of production sold:ˇ

4,000 units? 6,000 units? 8,000 units?ˇ

d. Find the degree of operating leverage for the production and sales levels given in part (c).

e. What is the effect on the degree of operating leverage as sales rise above the break-even point?