Question
Consider a firm whose financial information is as follows: Number of units produced and sold (per year) 18,000 Sales price per unit 8.00 Fixed operating
Consider a firm whose financial information is as follows:
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Number of units produced and sold (per year) | 18,000 |
Sales price per unit | 8.00 |
Fixed operating costs (per year) | 20,000 |
Fixed financing costs (per year) | 10,000 |
Variable cost per unit | 5.00 |
Earnings before interest and tax | 34,000 |
At 18,000 units produced and sold, calculate:
degree of operating leverage (DOL)
degree of financial leverage (DFL)
degree of total leverage (DTL)
If the number of units produced and sold decreases by 10%, what is the perchange change of the firms operating profit (EBIT)?
Calculate the firms breakeven quantity of sales.
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