Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Your business plan for your proposed start-up firm envisions first-year revenues of $600,000, fixed costs of $150,000, and variable costs equal to one-third of revenue.
Your business plan for your proposed start-up firm envisions first-year revenues of $600,000, fixed costs of $150,000, and variable costs equal to one-third of revenue. What are expected profits based on these expectations? (Omit the "$"sign in your response.) What is the degree of operating leverage based on the estimate of fixed costs and expected profits? (Round your answer to 2 decimal places.) if sales are 10% below expectation, what will be the decrease in profits? (Round your answer to 2 decimal places. Omit the "%" sign in your response.) Based on the DOL, what is the largest percentage shortfall in sales relative to original expectations that the firm can sustain before profits turn negative? What are break-even sales at this point? (Round "Shortfall" answer to 2 decimal places. Omit the "$ & %" signs in your response.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started