Two production methods are being evaluated for a new product. Consider the following cost structure for the labor-intensive method: Selling price per unit: $28 Direct materials per unit: $4 Direct labor per unit: $12 Variable overhead per unit: $3 Annual fixed manufacturing overhead: $600,000 Annual selling costs: Fixed = $400,000; Variable = $1.50 per unit At a production and sales volume of 200,000 units, compute the degree of operating leverage. Round your answer to two decimal places.

Two production methods are being evaluated for a new product. Consider the following cost structure for the labor-intensive method: Selling price per unit: $28 Direct materials per unit: $4 Direct labor per unit: $12 Variable overhead per unit: $3 Annual fixed manufacturing overhead: $600,000 Annual selling costs: Fixed = $400,000; Variable = $1.50 per unit At a production and sales volume of 200,000 units, compute the degree of operating leverage. Round your answer to two decimal places.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 3CE: Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins...

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