Based on the facts of Easy Problems Corp. At the present average monthly sales level of 11,000 units, the corporation's operating leverage factor (OLF) is Easy Problems Corp.produces and sells a singleproduct. The selling price isPhp 25.00 and the variablecosts is Php 15.00 per unit.The corporation's fixed costsis Php 100,000.00 per month.Average monthly sales is11,000 units. 1-

Contribution=Selling price-Variable cost×Number of units sold=Php. 25-Php. 15×11,000=Php. 110,000

Answered: Easy Problems Corp. produces and sells…

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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The following data relates to the XYZ Corporation and its X Division. X Division sales P 8,000,000 X Division operating income P 480,000 X Division total assets P 2,000,000 X Division current liabilities P 600,000 Corporate target rate of return 14% Corporate weighted average cost of capital 10% Corporate effective tax rate 30% What is the X Divisions Economic Value Added (EVA)?
Kiwi Airlines has fixed operating costs of sh.5.8 million, and its variable costs amount to 20 percent of sales revenue. The firm has sh.2 million in bonds outstanding with a coupon interest rate of 8 percent. Revenues for the firm are sh.8 million and the firm has a 21% corporate tax rate. b) What is the firm's degree of financial leverage? Select one: A. 1.45 B. 1.36 C. 10.67 D. None of the above
6. A review of the degree of financial leverage (DFL) It is December 31. Last year, Water and Power Company (W&P) had sales of $80,000,000, and it forecasts that next year's sales will be $86,400,000. Its fixed costs have been-and are expected to continue to be-$44,000,000, and its variable cost ratio is 20.00%. W&P's capital structure consists of a $15 million bank loan, on which it pays an interest rate of 12%, and 5,000,000 shares of outstanding common equity. The company's profits are taxed at a marginal rate of 35%. The following are the two principal equations that can be used to calculate a firm's DFL value: DFL (at EBIT = $X): Given this information, complete the following sentences: Percentage Change in EPS Percentage Change in EBIT • The company's percentage change in EBIT is • The percentage change in W&P's earnings per share (EPS) is • The degree of financial leverage (DFL) at $86,400,000 is False DFL (at EBIT = $X): Consider the following statement about DFL, and indicate…
DAR, Incorporated sells cutlery generating pretax profits of $6,928,000. It depreciated $2,480,000 in assets this year, had fixed costs of $2,070,000, and variable costs of $2,278,000. What is DAR's degree of operating leverage? Multiple Choice 1.44 1.98 1.66 1.37
Polymer Coating Enterprises has an operating income of $100,000 on revenues of $1,000,000. Average invested assets are $500,000 and the Company has an 8% cost of capital. What is the residual income?
GenoPearls Company, a division of PUSHING THE LIMITS Corporation, has sales of P12,000,000 and variable costs and expenses amounting to P8,000,000. The average assets utilized in the operations also amount to P8,000,000 with a 12% cost of capital. Direct fixed costs and expenses amounts to P1,000,000. In measuring the performance of GenoPearls Company, return on investment and residual income are then by what amounts? (Sample format of the answer: 12.34%; P1,234,567)
XYZ company expects in the coming year: sales of 40,000 units at $10 per unit, variable operatingcosts of $4 per unit, fixed operating costs of $30,000, interest of $50,000, and preferred stockdividends of $24,000. The Company is in the 40% tax bracket.1. Compute XYZ company’s Degree of Total Leverage (DTL) and explain its meaning.2. If XYZ company’s Earnings Per Share (EPS) is currently $7.2, estimate its EPS in case ofa 10% increase in sales revenue
Alpha Corporation reported the following data for its most recent year: sales, $670,000; variable expenses, $420,000; and fixed expenses, $200,000. The company's degree of operating leverage is closest to: Multiple Choice O 5.00 2.70 2.00 13.00
Consider the following summary modified income statement for Tech Inc.: Sales $593,000 Variable Operating Costs 252,000 Contribution Margin $341,000 Fixed Operating Costs 121,000 Operating Income $220,000 Interest Expense 26,000 Net Income $194,000 Calculate Tech's degree of operating leverage. A В C E 1 2 Degree of Operating Leverage = 4 5 7 8 9 10 3. 6.
Dupont has determined that its degree of operating leverage (DOL) is 3.1 and its degree of financial leverage (DFL) is 1.9. What impact will a 5% decreases in sales have on Dupont's net income?
Q1. A company has direct production costs equal to 57.74 percent of total annual sales, and fixed charges, overhead, and general expenses equal to 0.29. If management proposes to increase present annual sales of 4.5 million by 29.4 percent with a 15.33 percent increase in fixed charges, overhead, and general expenses. Estimate a) Annual sales amount that is required to provide the same gross earnings as the present plant operation? b) Net profit if the expanded plant were operated at full capacity with an income tax on gross earnings of 35 percent? c) Net profit for the enlarged plant if total annual sales remained at 4.5 million? d) Net profit for the enlarged plant if the total annual sales actually decreased by 100,000?
(15) The Central Division of Chemical Company has a return on investment of 22% and an investment turnover of 1.63. What is the profit margin?

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Easy Problems Corp. produces and sells a single product. The selling price is Php 25.00 and the variable costs is Php 15.00 per unit. The corporation's fixed costs is Php 100,000.00 per month. Average monthly sales is 11,000 units. 11