Financial Management Chapter 13 Case 1. ompU's subsidiary, ellU, is expanding its cell phone line to include cell phone cases. The cases will be sold for S20 each, have a variable operating cost of S13 per case, and annual fixed operating costs of $70,000. What is the operating breakeven point of the cell phone cases? -fixed oc/price-operating costs 70,000/20-13- 10,000 units a. b. Calculate the total operating costs at the breakeven point. =13 * 1 0.000+70.000-$200,000 c. If CelllU can sell 20,000 cell phone cases per year, how much EBIT will elllU realize on the cases? EBIT-Qx(Price-13)-70,000 20,000(7)-70,000- S70,000 2. euw would have to take out a loan to begin the cell phone case business, so they would like to know how a change in sales will affect their bottom line. The interest expense on the loan would be S10,000 per year. ellU has 15,000 common shares outstanding; their a. Compute the degree of operating leverage for CellU 20,000*7-140,000/140,000-80,000-2.33 b. Compute the degree of financial leverage for CelllU. c. Compute the degree of total leverage for ellU d. Calculate the EPS for the cell phone cases e. If ellU can increase their sales units to 30,000 per year, use the DOL, DFL, and DTL to calculate the estimated changes in EBIT and EPS