FINANCIAL MANAGEMENT

The following information pertains to Beauty Berhad:

selling price per unit: RM180

variable cost per unit: RM80

fixed cost per year: RM400,000

debt financing: RM800,000 at 10% interest

Numbers of shares: 400,000 shares

tax rate: 24%

required:

at a sales level of 50,000 units:

a. Calculate the break-even point in Ringgit

b. Calculate the degree of Operating Leverage (DOL), degree of financial leverage (DFL) and degree of total leverage (DTL).

c. Referring to your answer in (b), show the effect on the earnings per share (EPS) if:

i. sales increase by 20%

ii. sales decrease by 30%