Solemn Company has an operating leverage of 2.O. Sales for the current year are $100,000 with acontribution margin of $50,000. Sales are expected to be $150,000 next year. Operating incomefor the current year can be expected to increase by what amount over the previous year?O $25,000O None of the aboveO $75,000O $50,000

solution : given : operating leverage =2.0 sales (current year) =$100,000…

Answered: Solemn Company has an operating…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Atlas Company has a monthly target operating income of $20,000. Variable expenses are 60% of sales and monthly fixed expenses are $11,400. What is ?John's operating leverage factor at the target level of operating income 1.75 ) 1.57 ) 1.43 O 2.00 1.35
4 Atlas Company has a monthly target operating income of $20,000. Variable expenses are 60% of sales and monthly fixed expenses are $11,400. What is ?John's operating leverage factor at the targetlevel of operating income 1.75 ) 1.57 () 1.43 ) 2.00 () 1.35 ()
XYZ company expects in the coming year: sales of 40000 units at $10 per unit, variable operating costs of $4 per unit, fixed operating costs of $30000, interest of $50000, and preferred stock dividends of $24000. The Company is in the 40% tax bracket. a. Compute the following and explain their meaning: 1- Degree of Operating Leverage (DOL). 2- Degree of Financial Leverage (DFL). 3- Degree of Total Leverage (DTL). b. If XYZ company’s Earnings Per Share (EPS) is currently $7.2, estimate its EPS in case of a 10% increase in earnings before interest and tax (EBIT).
Last year, Garrison Manufacturing sold 500 000 units at $4 each. Sales volume is expected to increase by 15% in the upcoming year, and sales price is expected to decrease by 5% in the upcoming year. The expected sales revenue for the upcoming year is: A. $2 255 000 B. $2 185 000 C. $2 645 000 D. $2 000 000
SS
Company B’s income statement for this year is shown below. Assume that the company’s sales will increase by 10% but fixed expenses remain the same next year. By what percentage will net operating income increase? Sales $100 Variable expenses 30 Contribution Margin 70 Fixed expenses 35 Net operating income $35 a)20% b)10% c)40% d)30%
The Carioco Company has two divisions that operate independently of one another. The financial data for the year 2022 reported the following results: Alpha Beta Sales $3,000,000 $2,500,000 Operating income 750,000 550,000 Taxable income 650,000 375,000 Investment 6,000,000 5,000,000 The company's desired rate of return is 10%. Income is defined as operating income. Required: What are the respective residual incomes for the Alpha and Beta Divisions? a. $150,000 and $50,000 b. $150,000 and $30,000 c. $50,000 and a negative $150,000 d. $30,000 and $50,000
The company BAC inc. sells a single product for $ 5 a unit. Its annual fixed operating costs are estimated at $ 180,000 including $ 30,000 in depreciation. Its unit variable cost is estimated at $ 2. The amount of interest paid annually to bondholders is $ 45,000. The corporate tax rate is 35%.a) Estimate the general breakeven point of the business?b) Estimate the company's cash flow breakeven point?c) Estimate the operating leverage of the business at a sales level ofd) 120,000 units?e) Estimate the company's financial leverage for an EBIT of $ 50,000?f) Estimate the total leverage of the business at a sales level of 80,000 units?
Based on the following information, fill the information in the given below Income statement of a Company The company expects to sell 3000 units in the current year and the price per unit is 10 OMR. The variable cost per unit of the company is 4 OMR and the fixed cost is 6000 OMR. In the next year company expects to sell 6000 units. Calculate EBIT for the current year and the next year. The company also has a $30,000 bond with a 10% annual coupon rate and an issue of 500 shares of $4 annual dividend preferred stock. It also has 1,000 share of common stock outstanding. The tax rate for the Company is 40%. Fill out the given below Income statement and calculate the Degree of operating leverage Degree of Financial leverage Degree of Total leverage. YEAR 1 YEAR 2 Sales Quantity 3000 6000 Sales Revenue (in OMR)(selling price per unit is 10 OMR) Less: Variable operating costs( VC per unit is 4 OMR) Less: Fixed operating costs…
14
Unit sales are expected to reach 30,000 per year, the price per unit is expected to be $80, variable costs are $40 per unit and fixed costs are $80,000 per year. The company pays $250,000 in interest per year. What is the degree of total leverage at the expected levels? Using the degree of total leverage, what is the expected percentage change in earnings per share (EPS) if sales turn out to be 16% lower than expected?
Boss, Inc. has consistently generated these operating results for the past several years:

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS