Question
Suppose QuickCharge Corporation manufactures phone chargers. They sell their chargers for $20. Their fixed operating costs are $100,000 and their variable operating costs are $10
Suppose QuickCharge Corporation manufactures phone chargers. They sell their chargers for $20. Their fixed operating costs are $100,000 and their variable operating costs are $10 per charger. Currently they are selling 30,000 chargers per year.
A) What is QuickCharges EBIT (earnings before interest and taxes) at current sales of 30,000?
B) What is QuickCharges breakeven point?
C) Calculate the EBIT if QuickCharges sales increase 50% to 45,000 chargers. What is the percent of change in EBIT under this increase in sales? Also, calculate the EBIT if the company's sales decrease 50% to 15,000 chargers. What is the percent of change in EBIT under this decrease in sales?
D) What is QuickCharges degree of operating leverage? Based on your computation, what does its operating leverage say about QuickCharges business risk?
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