OceanGate sells external hard drives for $300 each. Its total fixed costs are $30 million, and its variable costs per unit are $230. The corporate tax rate is 30%. If the economy is strong, the firm will sell 2 million drives, but if there is a recession, it will sell only half as many.

a. What will be the percentage decline in sales if the economy enters a recession?

b. What will be the percentage decline in profits if the economy enters a recession?

c. Comparing your answers to (a) and (b), how would you measure the operating leverage of this firm?

OceanGate sells external hard drives for $300 each. Its total fixed costs are $30 million, and its variable costs per unit are $230. The corporate tax rate is 30%. If the economy is strong, the firm will sell 2 million drives, but if there is a recession, it will sell only half as many. a. What will be the percentage decline in sales if the economy enters a recession? Answer is complete and correct. Percentage decline in sales 50% b. What will be the percentage decline in profits if the economy enters a recession? Answer is complete but not entirely correct. Percentage decline in profit 83 X % c. Comparing your answers to (a) and (b), how would you measure the operating leverage of this firm? Answer is complete but not entirely correct. Operating leverage 1.67 X