Multiple leverage measures Hugg-a-Bugg Soft Toys manufactures teddy bears. The annual sales are 350,000 teddy bears at
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Multiple leverage measures Hugg-a-Bugg Soft Toys manufactures teddy bears. The annual sales are 350,000 teddy bears at $26 per teddy bear. Fixed operating costs are $28,000 while variable operating costs are $16 per teddy bear. The manufacturer pays annually $4,500 of interest on long-term debt and $3,000 of preferred dividends. A tax rate of 40% applies.
a. Calculate the operating breakeven point in units.
b. Calculate the degree of operating leverage (DOL) at base sales levels.
c. Calculate the degree of financial leverage (DFL).
d. Calculate the degree of total leverage (DTL).
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Step by Step Answer:
To calculate the operating breakeven point in units we can use the following formula Operating Breakeven Point in units Fixed Operating Costs Selling ...View the full answer
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Related Book For 
Principles Of Managerial Finance
ISBN: 9781292018201
14th Global Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
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