Question
Play-More Toys produces inflatable beach balls, selling 420,000 balls per year. Each ball produced has a variable operating cost of $ 0.84 and sells for
Play-More Toys produces inflatable beach balls, selling 420,000 balls per year. Each ball produced has a variable operating cost of $ 0.84
and sells for $ 1.11. Fixed operating costs are $27,000. The firm has annual interest charges of $5,900, preferred dividends of $1,900, and a 40 %
tax rate.
a. Calculate the operating breakeven point in units.
b. Use the degree of operating leverage (DOL) formula to calculate DOL.
c. Use the degree of financial leverage (DFL) formula to calculate DFL.
d. Use the degree of total leverage (DTL) formula to calculate DTL. Compare this to the product of DOL and DFL calculated in parts (b) and (c).
I found A and B...I need help with C and D...
a. The operating breakeven point in units is
100000 (Round to the nearest integer.)
b. The degree of operating leverage is
1.3125 (Round to four decimal places.)
c. The degree of financial leverage is ????? (Round to four decimal places.)
d. The degree of total leverage is ????
(Round to four decimal places.)
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