Please provide correct answer general accounting May Clothing is a retail men's clothing store. May'scost is $20 per shirt. The sales price is $40 per shirt.They plan to sell 400,000 shirts each year, which at thislevel would result in before-tax profit of $2,500,000.What is their degree of operating leverage (DOL) atthis volume level?

Step 1: Define Degree of Operating LeverageThe degree of operating leverage is an accounting term…

Answered: May Clothing is a retail men's clothing…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section14.A: Breakeven Analysis

Problem 6P

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Bright Fashions is a clothing store that sells men's shirts. Their variable cost per shirt is $22, and the sales price is $42. Bright Fashions plans to sell 450,000 shirts for the year, and they expect a before-tax profit of $3,000,000 at this volume. Additionally, they received an extra $15,000 from the sale of an old company vehide. What is the degree of operating leverage (DOL) at this volume level? Cosmos Enterprises provides the following partial income statement: Sales: $1,500,000 Less: Variable costs: $700,000 Contribution Margin: $800,000 Less: Fixed costs: $350,000 Maintenance Costs: $50,000Net Operating Income: $450,000 Requirement: What is Cosmos Enterprises' degree of operating leverage? Options: 1.57 4.38 1.86 2.00
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May Clothing is a retail men's clothing store. May's cost is $20 per shirt. The sales price is $40 per shirt. They plan to sell 400,000 shirts each year, which at this level would result in before-tax profit of $2,500,000. What is their degree of operating leverage (DOL) at this volume level?