Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

(b) TSC Chocolate Manufacturing Sdn. Bhd. produces quality chocolate that wholesales for RM8.00. Each packet of chocolate has variable operating costs of RM5.50. Fixed operating

image text in transcribed

(b) TSC Chocolate Manufacturing Sdn. Bhd. produces quality chocolate that wholesales for RM8.00. Each packet of chocolate has variable operating costs of RM5.50. Fixed operating costs are RM20,000 per year. The firm pays RM13,000 interest and preferred dividends of RM 7,000 per year. At this point, the firm is selling 30,000 packets of chocolates per year and is taxed at a rate of 26%. Required: (i) Calculate TSC Chocolate Manufacturing Sdn. Bhd. operating breakeven point. (2 marks) (ii) On the basis of the firm's current sales of 30,000 units per year and its interest and preferred dividend costs, calculate its Earnings Before Interest and Tax (EBIT) and earnings available for common stockholders. (9 marks) (iii) Calculate the firm's degree of operating leverage (DOL). (2 marks) (iv) Calculate the firm's degree of financial leverage (DFL). (2 marks) (v) Calculate the firm's degree of total leverage (DTL). (2 marks) [Total: 25 Marks]

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Intelligence For HR Professionals

Authors: Karen Berman, Joe Knight, John Case

1st Edition

1422119130, 978-1422119136

More Books

Students also viewed these Finance questions