explain the formula that you use

Problem 12-15 Integrative: Multiple leverage measures. Play-More Toys produces inflatable beach balls, selling 400.000 balls per year. Each ball produced has a variable operating cost of $0.84 and sells for $1.00. Fixed operating costs are $28.000. The firm has annual interest charges of $6.000, preferred dividends of $2,000, and a 21% tax rate. a. Calculate the operating breakeven point in units. b. Use the degree of operating leverage (DOL) formula to calculate DOL. c. Use the degree of financial leverage (DFL) formula to calculate DFL. d. Use the degree of total leverage (DTL) formula to calculate DTL. Compare this answer with the product of DOL and DFL calculated in parts b and c. Solution a. Calculate the operating breakeven point in units. Sale price per unit $1,00 Variable operating cost per unit $0,84 Fixed operating cost S28 0001 Breakeven quantity beach balls b. Use the degree of operating leverage (DOL) formula to calculate DOL. Units Selling price Variable operating costs Fixed operating costs Degree of operating leverage 00 000 $1,00 $0,84 $28 000 c. Use the degree of financial leverage (DFL) formula to calculate DFL. c. Use the degree of financial leverage (DFL) formula to calculate DFL. EBIT Annual interest Preferred stock dividend Tax rate Degree of financial leverage S6 000 S2 000 21% d. Use the degree of total leverage (DTL) formula to calculate DTL. Compare this answer with the product of DOL and DFL calculated in parts b and c. DTL (formula) DTL (product)