Firms in Japan often employ both high operating and financial leverage because of the use of modern technology and close borrower–lender relationships. Assume the Mitaka Company has a sales volume of 146,000 units at a price of $26 per unit; variable costs are $6 per unit, and fixed costs are $2,010,000. Interest expense is $421,000. What is the degree of combined leverage for this Japanese firm? (Round your answer to 2 decimal places.)
Firms in Japan often employ both high operating and financial leverage because of the use of modern technology and close borrower–lender relationships. Assume the Mitaka Company has a sales volume of 146,000 units at a price of $26 per unit; variable costs are $6 per unit, and fixed costs are $2,010,000. Interest expense is $421,000.
What is the degree of combined leverage for this Japanese firm? (Round your answer to 2 decimal places.)
In order to determine the contribution margin, the variable cost are required to be subtracted from the sales revenue. From the contribution margin, the fixed cost are required to be subtracted so as to determine the Earning before interest. From the earning before interest, the interest expenses are required to be subtracted so as to determine the net income.
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