Your Firm, Inc, (YFI) has been busy analyzing a new product. The equipment to produce the product will cost $250,000 and will be depreciated to zero over the four-year life of the product using straight line depreciation. The incremental cash fixed costs associated with this project are $100,000/year. It is believed that the product can be sold for $30/unit and the variable costs to manufacture and distribute the product will be $16/unit. YFI has a 10% required rate of return on products of this risk profile. Ignore taxes for this problem

What is the accounting breakeven for this product in units? _________(100000/30)-16= 3317.33units units________

What is the cash breakeven for this product in units? ___________FC/CONT____

What is the financial breakeven for this product in units? _____100000/7142.86-14 =__13.99_____units_

At the financial breakeven point what will the sales be expressed in dollars? _____100000/14 =$7142.86____

If the firm is operating at a level that is generating Operating Cash Flow of $1 million dollars per year, what is the firms Degree of Operating Leverage? ________________

If the firms unit sales volume increases by 20% what would you expect the OCF to be at the increased sales level, all else being constant? ____________