Annual production and sales 60% of 5,000 = 3000 Unit Contribution per Unit Rs. Selling Price 25 Per Unit Variable Price 15 Per Unit 10 Per Unit Total contribution is 3000 Units x Rs. 10 = Rs. 30,000 . Computation of leverage. Financial plan PLAN-X PLAN-Y Situation 1 Situation 2 Situation 1 Situation 2 Contribution 30000 30000 30000 30000 Fixed cost operating profit (or) EBIT 10000 12000 10000 12000 20000 18000 20000 18000 Interest on Debts 10% of 50,000 5000 5000 2500 2500 10% of 25,000 Earnings before Tax 15000 13000 17500 15500 (1) Operating Leverage Contribution 30000 30000 30000 30000 20000 18000 20000 18000 = 1.5 1.67 1.5 1.67 (ii) Financial Leverage Operating Profit (op) 20000 18000 20000 18000 Profit Before Tax (PBI) ) 15000 13000 17500 15500 (l) Combined leverage OLX FL= 1.5 x 1.33 1.67 x 1.38 1.5 X 1.14 1.67 x 1.16 1.995 2.30 1.71 1.94 Highest and least value of combined leverage Highest Value = 2.30 under situation 2 plan X. Least Value = 1.71 under situation 1 plan Y. t7 Calculate operating, financial and combined leverages under situations when fixed costs are: (i) Rs. 5,000 and (ii) Rs. 10,000 and financial plans 1 and 2 respectively from the following information pertaining to the operating and capital structure of a textile company Rs. Total Assets 30,000 Total Assets turnover 2 Variable cost as percentage of sales 60 Capital structure Financial Plan 1 2 Equity 10% debentures Rs. 30.000 10.000 Rs. 10.000 30.000