Hello tutor please provide correct answer general Accounting question Firm A produced 5,000 units last year, fixedcosts were $50,000, selling price was $75,and the variable unit cost was $55. What wasthe firm's degree of operating leverage(DOL)? If Sales increase by 5%, what will bethe effect on EBIT?

Step 1: Define Selling PriceSelling price indicates the value of money which must be paid to get a…

Answered: Firm A produced 5,000 units last year,…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 10P

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Unit sales are expected to reach 30,000 per year, the price per unit is expected to be $60, variable costs are $40 per unit and fixed costs are $90,000 per year. The company pays $250,000 in interest per year. What is the degree of operating leverage at the expected levels? What is the degree of financial leverage at the expected levels? What is the degree of total leverage at the expected levels? What is the expected percentage change in EPS if unit sales turn out to be 10,000 lower than expected?
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Firm A produced 5,000 units last year, fixed costs were $50,000, selling price was $75, and the variable unit cost was $55. What was the firm's degree of operating leverage (DOL)? If Sales increase by 5%, what will be the effect on EBIT?