A business is considering a proposed project with fixed costs of $50,000 per year. The operating cash flow at 10,000 units is $80,000. • Compute the degree of operating leverage (DOL). • If units sold increase from 10,000 to 10,500, what is the increase in operating cash flow? What is the new degree of operating leverage?
A business is considering a proposed project with fixed costs of $50,000 per year. The operating cash flow at 10,000 units is $80,000. • Compute the degree of operating leverage (DOL). • If units sold increase from 10,000 to 10,500, what is the increase in operating cash flow? What is the new degree of operating leverage?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 1PA: Your company is planning to purchase a new log splitter for is lawn and garden business. The new...
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what is the new degree of operating leverage
Transcribed Image Text:A business is considering a proposed project with fixed costs of $50,000 per year. The
operating cash flow at 10,000 units is $80,000.
•
Compute the degree of operating leverage (DOL).
•
If units sold increase from 10,000 to 10,500, what is the increase in operating cash
flow?
What is the new degree of operating leverage?
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