Operating Leverage. Natural Bodyworks $($NB$)$ produces the popular Ab Stretcher

that they sell for $$200$ per unit. NB$\text{'}$s total fixed costs $($fixed operating costs $+$

depreciation$)$ for the Ab Stretcher are $$200,000.$ Their variable costs are $$30$ per

unit. They are financed entirely by equity and face a $21\%$ corporate tax rate. If sales

increase from $4,000$ units to $5,000$ units, what is the percentage increase in NOI?

Question $5$

Break$-$even point. NB$\text{'}$s managers are concerned about the operating leverage of

the Ab Stretcher project. Next year's forecast sales are $3,500$ units and they would

like to know if The Ab Stretcher will be profitable at this sales level.

The annual depreciation for the Ab Stretcher project is $$100,000.$ Sales price is

$$200$ per unit and variable cost per unit is $$30.$ Fixed operating costs are $$100,000$

per year and the tax rate is $21\%.$

What is the break$-$even point?