A project has fixed costs of $2,700 per year, depreciation charges of $900 a year, annual revenue of $28,800, and variable costs equal to two-thirds of revenues. a. If sales increase by 15%, what will be the percentage increase in pretax profits? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. What is the degree of operating leverage of this project? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
A project has fixed costs of $2,700 per year, depreciation charges of $900 a year, annual revenue of $28,800, and variable costs equal to two-thirds of revenues. a. If sales increase by 15%, what will be the percentage increase in pretax profits? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. What is the degree of operating leverage of this project? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![A project has fixed costs of $2,700 per
year, depreciation charges of $900 a year,
annual revenue of $28,800, and variable
costs equal to two-thirds of revenues.
a. If sales increase by 15%, what will be
the percentage increase in pretax profits?
(Do not round intermediate calculations.
Enter your answer as a percent rounded to
2 decimal places.)
b. What is the degree of operating
leverage of this project? (Do not round
intermediate calculations. Round your
answer to 2 decimal places.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7ec6d0f6-0624-4a27-82ed-5a92720c007e%2F36bcf5bd-9a3b-4698-a179-38de27e0045b%2F6rjlq19_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A project has fixed costs of $2,700 per
year, depreciation charges of $900 a year,
annual revenue of $28,800, and variable
costs equal to two-thirds of revenues.
a. If sales increase by 15%, what will be
the percentage increase in pretax profits?
(Do not round intermediate calculations.
Enter your answer as a percent rounded to
2 decimal places.)
b. What is the degree of operating
leverage of this project? (Do not round
intermediate calculations. Round your
answer to 2 decimal places.)
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