EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 14, Problem 11P
Summary Introduction

To compute: Degree of operating leverage.

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compute for the following items: g. If breakeven sales in units will increase by 10,000 units, how much will be the increase/decrease in profits? h. If breakeven sales in units will decrease by 4,000 units, how much will be the increase/decrease in profits? i. If the firm wants to increase its current profits by P 60,000. How much sales revenue does it have to make?
Jakara Company is a service firm with current service revenue of $400,000 and a 40% contribution margin. Its fixed costs are $80,000.  Maldives Company has current sales of $6,610,000 and a 45% contribution margin. Its fixed costs are $1,800,000. a. Compute the degree of operating leverage for both companies. Which company will benefit most from a 15% increase in sales? Explain why. b. Illustrate your findings in an Income Statement that is increased by 15%.
Boom Company has sales volume of 70,000 units with a unit selling price of $120 per unit. The variable expenses are $80 per unit, and the total fixed expenses are $2,100,000. 15. What is the degree of operating leverage? * 2.00 3.00 4.00 5.00 None of the above 16. If the sales volume increases by 15%, and all other items are the same, what will be the effect on the net operating income? * The net operating income will increase by $420,000 The net operating income will increase by $700,000 The net operating income will increase by $1,120,000 The net operating income will increase by $2,800,000 None of the above O O O
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EBK CONTEMPORARY FINANCIAL MANAGEMENT
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ISBN:9781337514835
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Publisher:CENGAGE LEARNING - CONSIGNMENT
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