Multiple leverage measures Hugg-a-Bugg Soft Toys manufactures teddy bears. The annual sales are 350,000 teddy bears at $26 per teddy bear. Fixed operating costs are $28,000 while variable operating costs are $16 per teddy bear. The manufacturer pays annually $4,500 of interest on long-term debt and $3,000 of preferred dividends. A tax rate of 40% applies.
a. Calculate the operating break-even point in units.
b. Calculate the degree of operating leverage (DOL) at base sales levels.
c. Calculate the degree of financial leverage (DFL).
d. Calculate the degree of total leverage (DTL).