Green Apparel is a retail men's clothing store. Green's variable cost is $18 per shirt, and the sales price is $38 per shirt. Green plans to sell 350,000 shirts for the year, and at this level, they would generate a before-tax profit of $2,100,000. Green Apparel also received a discount of 5% on their office furniture, which cost $10,000. What is the DOL at this volume level? Nara Industries presents its partial income statement as follows: Sales: $2,000,000 Less: Variable costs: $1,200,000 Contribution Margin: $800,000 Less: Fixed costs: $300,000 Additional Staff Bonuses: $25,000 Net Operating Income: $500,000 Requirement: What is Nara Industries' degree of operating leverage? Options: 5.66 2.90 2.67 3.05
Green Apparel is a retail men's clothing store. Green's variable cost is $18 per shirt, and the sales price is $38 per shirt. Green plans to sell 350,000 shirts for the year, and at this level, they would generate a before-tax profit of $2,100,000. Green Apparel also received a discount of 5% on their office furniture, which cost $10,000. What is the DOL at this volume level? Nara Industries presents its partial income statement as follows: Sales: $2,000,000 Less: Variable costs: $1,200,000 Contribution Margin: $800,000 Less: Fixed costs: $300,000 Additional Staff Bonuses: $25,000 Net Operating Income: $500,000 Requirement: What is Nara Industries' degree of operating leverage? Options: 5.66 2.90 2.67 3.05
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Green Apparel is a retail men's clothing store. Green's variable cost is $18 per shirt, and the sales price is
$38 per shirt. Green plans to sell 350,000 shirts for the year, and at this level, they would generate a
before-tax profit of $2,100,000. Green Apparel also received a discount of 5% on their office furniture,
which cost $10,000. What is the DOL at this volume level? Nara Industries presents its partial income
statement as follows: Sales: $2,000,000 Less: Variable costs: $1,200,000 Contribution Margin: $800,000
Less: Fixed costs: $300,000 Additional Staff Bonuses: $25,000 Net Operating Income: $500,000
Requirement: What is Nara Industries' degree of operating leverage?
Options:
5.66
2.90
2.67
3.05
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