Unit sales are expected to reach 25,000 per year, the price per unit is expected to be $70, variable costs are $40 per unit and fixed costs are $100,000 per year. What is the degree of operating leverage at the expected levels? Using the degree of operating leverage, what is the expected percentage change in EBIT if unit sales turn out to be 6,000 lower than expected?
Unit sales are expected to reach 25,000 per year, the price per unit is expected to be $70, variable costs are $40 per unit and fixed costs are $100,000 per year. What is the degree of operating leverage at the expected levels? Using the degree of operating leverage, what is the expected percentage change in EBIT if unit sales turn out to be 6,000 lower than expected?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Unit sales are expected to reach 25,000 per year, the price per unit is expected to be $70, variable costs are $40 per unit and fixed costs are $100,000 per year.
What is the degree of operating leverage at the expected levels?
Using the degree of operating leverage, what is the expected percentage change in EBIT if unit sales turn out to be 6,000 lower than expected?
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