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28 Sep 2019
Jones Creations produces hand warmers, selling 400,000 warmers ayear. Each warmer produced has a variable operating cost of $0.84and sells for $1.00. Fixed operating costs are $28,000. The firmhas annual interest charges of $6,000, preferred dividends of$2,000, and a 40% tax rate.
a) Calculate the operating breakeven point in units
b) Use the degree of operating leverage (DOL) formula to calculateDOL.
c) Use the degree of financial leverage (DFL) formula to calculateDFL.
d) Use the degree of total leverage (DTL) formula to calculateDTL.
Jones Creations produces hand warmers, selling 400,000 warmers ayear. Each warmer produced has a variable operating cost of $0.84and sells for $1.00. Fixed operating costs are $28,000. The firmhas annual interest charges of $6,000, preferred dividends of$2,000, and a 40% tax rate.
a) Calculate the operating breakeven point in units
b) Use the degree of operating leverage (DOL) formula to calculateDOL.
c) Use the degree of financial leverage (DFL) formula to calculateDFL.
d) Use the degree of total leverage (DTL) formula to calculateDTL.
a) Calculate the operating breakeven point in units
b) Use the degree of operating leverage (DOL) formula to calculateDOL.
c) Use the degree of financial leverage (DFL) formula to calculateDFL.
d) Use the degree of total leverage (DTL) formula to calculateDTL.
Irving HeathcoteLv2
30 Sep 2019
