Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Study Volt has the following financial information: Unit Sales 8 6 , 0 0 0 Revenue $ 8 , 6 0 0 , 0 0

Study Volt has the following financial information:
Unit Sales 86,000
Revenue $ 8,600,000
Variable Costs $ 2,150,000
Contribution Margin $ 6,450,000
Fixed Costs $ 1,800,000
Operating Income $ 4,650,000
a. What is Study Volts degree of operating leverage? Note: Round your answer to 2 decimals.
b. A 10% increase in sales will generate what percent increase in operating income? Note: Round your answer to 2 decimals. %
c. To deal with an industry-wide labor shortage, Study Volt has decided to increase automation on its production line. Doing so will decrease variable costs by 60% but will increase fixed costs by $2,000,000. Assuming constant sales, if Study Volt reconfigures its production line, what will be the change in Study Volts operating income? Note: Round your answer to 2 decimals. Enter a decrease as a negative value.
d. If Study Volt reconfigures its production line, what will be Study Volts degree of operating leverage? Note: Round your answer to 2 decimals.
e. If Study Volt reconfigures its production line, a 10% increase in sales will generate what percent increase in operating income? Note: Round your answer to 2 decimals. %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Information And Equity Valuation Theory, Evidence, And Applications

Authors: Guochang Zhang

1st Edition

1461481597, 9781461481591

More Books

Students also viewed these Accounting questions