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?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 4P

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