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As the Financial Controller for a manufacturing firm, you have constructed the following partial pro forma income statement for the next fiscal year: Required: a.
As the Financial Controller for a manufacturing firm, you have constructed the following partial pro forma income statement for the next fiscal year: Required: a. Calculate the break-even point in units. (2 Marks) b. Calculate the break-even point in RM. (2 Marks) c. Assume that the management is considering revising the sales price downward to RM13.40 to increase the sales volume by \25. Is the revised price a better alternative? (4 Marks) d. Calculate the degree of operating leverage at this level of output. (2 Marks) e. Calculate the degree of financial leverage. (2 Marks) f. Determine the degree of combined leverage. (2 Marks) g. If sales increase by \15, what will be the new level of the company's EPS if it has 200,000 shares outstanding? (3 Marks) h. Define and briefly discuss the dangers to a firm of having high level of: i. Operating leverage ii. Financial leverage (8 Marks)
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