Right answer Bucket Corporation had the following incomestatement:Sales$53,000Less: Variable costs $28,000Contribution margin $25,000Less: Fixed costs$16,000Net income$9,000Bucket's operating leverage is

Step 1:Operating leverage is a leverage ratio which is used to measure a company's ability to cover…

Answered: Bucket Corporation had the following…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 11P

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Tom Company reports the following data: Sales Variable costs Fixed costs Determine Tom Company's operating leverage. Round your answer to one decimal place. $156,332 81,532 30,800
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What is the operating leverage for this general accounting question?
Operating Leverage Income statements for two different companies in the same industry are as follows: Trimax, Inc. Quintex, Inc. $400,000 $562,500 200,000 112,500 $200,000 $450,000 150,000 400,000 $50,000 $50,000 Sales Less: Variable costs Contribution margin Less: Fixed costs Operating income Required: 1. Compute the degree of operating leverage for each company. Trimax Quintex 2. Compute the break-even point in dollars for each company. Trimax, Inc. Quintex, Inc. Why is the break-even point for Quintex, Inc., higher? 3. Suppose that both companies experience a 40 percent increase in revenues. Compute the percentage change in profits for each company, Trimax Quintex
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For a certain company, the cost function for producing x items is C(x)=40x+200, and the revenue function for selling x items in R(x)=−0.5(x−80)2+3,200. The maximum capacity of the company is 110 items. The profit function P(x) is the revenue function R(x) (how much it takes in) minus the cost function C(x) (how much it spends). In economic models, one typically assumes that a company wants to maximize its profit, or at least make a profit!Assuming that the company sells all that it produces, what is the profit function?P(x)= Preview Change entry mode . Hint: Profit = Revenue - Cost as we examined in Discussion 3. What is the domain of P(x)?Hint: Does calculating P(x) make sense when x=−10 or x=1,000? The company can choose to produce either 40 or 50 items. What is their profit for each case, and which level of production should they choose?Profit when producing 40 items = Number Profit when producing 50 items = Number Can you explain, from our model, why the company makes less profit…
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Bucket Corporation had the following income statement: Sales $53,000 Less: Variable costs $28,000 Contribution margin $25,000 Less: Fixed costs $16,000 Net income $9,000 Bucket's operating leverage is