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
Chapter 14 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Ch. 14.A - Prob. 1QTDCh. 14.A - Prob. 2QTDCh. 14.A - Prob. 3QTDCh. 14.A - Prob. 2PCh. 14.A - Prob. 3PCh. 14.A - Prob. 4PCh. 14.A - Prob. 5PCh. 14.A - Prob. 6PCh. 14.A - Prob. 7PCh. 14.A - Prob. 8P
Ch. 14 - Prob. 1QTDCh. 14 - Prob. 2QTDCh. 14 - Prob. 3QTDCh. 14 - Prob. 4QTDCh. 14 - Prob. 5QTDCh. 14 - Prob. 6QTDCh. 14 - Prob. 7QTDCh. 14 - Prob. 8QTDCh. 14 - Prob. 9QTDCh. 14 - Prob. 10QTDCh. 14 - Prob. 11QTDCh. 14 - Prob. 1PCh. 14 - Prob. 2PCh. 14 - Prob. 3PCh. 14 - Prob. 4PCh. 14 - Prob. 5PCh. 14 - Prob. 6PCh. 14 - Prob. 7PCh. 14 - Prob. 8PCh. 14 - Prob. 9PCh. 14 - Prob. 10PCh. 14 - Prob. 11PCh. 14 - Prob. 12PCh. 14 - Prob. 13PCh. 14 - Prob. 14PCh. 14 - Prob. 15PCh. 14 - Prob. 16PCh. 14 - Prob. 17PCh. 14 - Prob. 18PCh. 14 - Prob. 19PCh. 14 - Prob. 20PCh. 14 - Prob. 21PCh. 14 - Prob. 22PCh. 14 - Prob. 23PCh. 14 - Prob. 24PCh. 14 - Prob. 25PCh. 14 - Prob. 26PCh. 14 - Prob. 27PCh. 14 - Prob. 28PCh. 14 - Prob. 29PCh. 14 - Prob. 30PCh. 14 - Prob. 31PCh. 14 - Prob. 32PCh. 14 - Prob. 33PCh. 14 - Prob. 34P
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