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P1 Degree of operating leverage. Grey Products has fixed operating costs of $380,000, variable operating costs of $16 per unit, and a selling price of
| P1 Degree of operating leverage. Grey Products has fixed operating costs of $380,000, variable operating costs of $16 per unit, and a selling price of $63.50 per unit. | |||||||||
| a. | Calculate the operating breakeven point in units. | ||||||||
| b. | Calculate the firms EBIT at 9,000, 10,000, and 11,000 units, respectively. | ||||||||
| c. | With 10,000 units as a base, what are the percentage changes in units sold and EBIT as sales move from the base to the sales levels of 9,000 and 11,000 units, respectively? | ||||||||
| d. | Use the percentages computed in part c to determine the degree of operating leverage (DOL). | ||||||||
| e. | Use the formula for degree of operating leverage to determine the DOL at 10,000 units. | ||||||||
| Answer - fill in the blue boxes below. | |||||||||
| a. | Calculate the operating breakeven point in units. | ||||||||
| Selling price | $63.50 | ||||||||
| Variable operating costs | $16.00 | ||||||||
| Fixed operating costs | $380,000 | ||||||||
| Operating breakeven point | |||||||||
| b. | Calculate the firms EBIT at 9,000, 10,000, and 11,000 units, respectively. | ||||||||
| Units | 9,000 | 10,000 | 11,000 | ||||||
| Sales | |||||||||
| Less: Variable costs | |||||||||
| Less: Fixed costs | $380,000 | $380,000 | $380,000 | ||||||
| EBIT | |||||||||
| c. | With 10,000 units as a base, what are the percentage changes in units sold and EBIT as sales move from the base to the sales levels of 9,000 and 11,000 units, respectively? | ||||||||
| Units | 9,000 | 10,000 | 11,000 | ||||||
| Change in unit sales | |||||||||
| % change in unit sales | 0% | ||||||||
| Change in EBIT | |||||||||
| % change in EBIT | 0% | ||||||||
| d. | Use the percentages computed in part c to determine the degree of operating leverage (DOL). | ||||||||
| Degree of operating leverage | - | ||||||||
| e. | Use the formula for degree of operating leverage to determine the DOL at 10,000 units. | ||||||||
| Units | 10,000 | ||||||||
| Selling price | $63.50 | ||||||||
| Variable operating costs | $16.00 | ||||||||
| Fixed operating costs | $380,000 | ||||||||
| Degree of operating leverage | |||||||||
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Economic Growth In Latin America And The Impact Of The Global Financial Crisis
Authors: Mauricio Garita
1st Edition
1522549811,152254982X
