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Consider a four-year project with the following information: initial fixed asset investment = $570,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $30; variable costs = $22; fixed costs = $210,000; quantity sold = 87,000 units; tax rate = 32%. a. What is the degree of operating leverage at the given level of output? b. What is the degree of operating leverage at the accounting break-even level of output?

Consider a four-year project with the following information: initial fixed asset investment = $570,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $30; variable costs = $22; fixed costs = $210,000; quantity sold = 87,000 units; tax rate = 32%. a. What is the degree of operating leverage at the given level of output? b. What is the degree of operating leverage at the accounting break-even level of output?

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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Consider a four-year project with the following information: initial fixed asset investment = $570,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $30; variable costs = $22; fixed costs = $210,000; quantity sold = 87,000 units; tax rate = 32%. a. What is the degree of operating leverage at the given level of output? b. What is the degree of operating leverage at the accounting break-even level of output?
Transcribed Image Text:Consider a four-year project with the following information: initial fixed asset investment = $570,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $30; variable costs = $22; fixed costs = $210,000; quantity sold = 87,000 units; tax rate = 32%. a. What is the degree of operating leverage at the given level of output? b. What is the degree of operating leverage at the accounting break-even level of output?
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