You are presented with the financial information of Alex Limited.

Income statements for the years ending 31 December 2022 and 2021. 2022

(8) (5)

(9) annually.

(22 MARKS)

2021

1 150 000 (485 000) 665 000 (275 000) 390 000

Sales

Variable costs

Contribution

Fixed costs

Earnings before interest and tax (Net operating income)

Required:

1 254 000 (590 000) 664 000 (288 000) 376 000

a) Calculate the degree of operating leverage for 2022 and 2021. Comment on the answer obtained. (10)

MMFN73024 Special Exam 2022 Page 2/5

b) Calculate the Break-Even Point in Rands for 2022 and 2021. Provide a possible reason why there is a difference in the break-even point in Rands between 2022 and 2021. (12)