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Calculate operating leverage, financial leverage and combined leverage under situation 1 and 2 in financial plans A & B from the following information relating to the operation and capital structure of a company. Installed capacity                                        2,000 units Actual production and sales                        50% of the capacity Selling price                                                 P20 per unit Variable Cost                                         P10 per unit Fixed Cost: Under Situation I                                 P4,000 Under Situation II                                 P 5,000 Capital Structure:     Financial Plan   A B Equity P5,000 P15,000 Debt (Rate of Interest 10%) 15,000 5,000

Calculate operating leverage, financial leverage and combined leverage under situation 1 and 2 in financial plans A & B from the following information relating to the operation and capital structure of a company. Installed capacity                                        2,000 units Actual production and sales                        50% of the capacity Selling price                                                 P20 per unit Variable Cost                                         P10 per unit Fixed Cost: Under Situation I                                 P4,000 Under Situation II                                 P 5,000 Capital Structure:     Financial Plan   A B Equity P5,000 P15,000 Debt (Rate of Interest 10%) 15,000 5,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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  1. Calculate operating leverage, financial leverage and combined leverage under situation 1 and 2 in financial plans A & B from the following information relating to the operation and capital structure of a company.

Installed capacity                                        2,000 units

Actual production and sales                        50% of the capacity

Selling price                                                 P20 per unit

Variable Cost                                         P10 per unit

Fixed Cost:

Under Situation I                                 P4,000

Under Situation II                                 P 5,000

Capital Structure:

 

 

Financial Plan

 

A

B

Equity

P5,000

P15,000

Debt (Rate of Interest 10%)

15,000

5,000
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