Choose the correct letter of answer: Company B sells 500,000 bottles of soft drinks a year. Each bottle produced has variable cost of P0.25 and sells for P0.45. Fixed operating costs are P50,000.00. The company has current interest charges of P6,000.00 and preferred dividends of P2,400.00. The corporate tax rate is 40%. Calculate the degree of operating leverage and degree of financial leverage. a. 2 and 1.25 b. 2.5 and 1.5 c. 3 and 1.75 d. 2.5 and 2.0 e. 3 and 2.25

Choose the correct letter of answer: Company B sells 500,000 bottles of soft drinks a year. Each bottle produced has variable cost of P0.25 and sells for P0.45. Fixed operating costs are P50,000.00. The company has current interest charges of P6,000.00 and preferred dividends of P2,400.00. The corporate tax rate is 40%. Calculate the degree of operating leverage and degree of financial leverage. a. 2 and 1.25 b. 2.5 and 1.5 c. 3 and 1.75 d. 2.5 and 2.0 e. 3 and 2.25

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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Question

Choose the correct letter of answer:

Company B sells 500,000 bottles of soft drinks a year. Each bottle produced has variable cost of P0.25 and sells for P0.45. Fixed operating costs are P50,000.00. The company has current interest charges of P6,000.00 and preferred dividends of P2,400.00. The corporate tax rate is 40%. Calculate the degree of operating leverage and degree of financial leverage.

a. 2 and 1.25
b. 2.5 and 1.5
c. 3 and 1.75
d. 2.5 and 2.0
e. 3 and 2.25

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