Problem: (Break even point and operating leverage)
Allison radio manufacture a complete line of radio and communication equipment for law enforcement agencies. The average selling price of its finished product is $180 per unit. The variable cost for the same units is $126. Allison radio incurs fixed cost of $540,000 per year.
Q1. What is the break-even point in units for the company?
Q2. What is the dollar sales volume the firm must achieve in order to reach the break-even point?
Q3. What would be the firm's profit of loss at the following units of production sold?
12,000 units? 15,000 units? 20,000 units
Q4. Find the degree of operating leverage for the production and sales levels given in Part (C).