Problem:
Rocky Mount Metals Company manufactures an assortment of wood-burning stoves. The average selling price for the various units is $500. The associated variable cost is $350 per unit. Fixed costs for the firm average $180,000 annually.
Requirement:
Question 1: What is the break-even point in units for the company?
Question 2: What is the dollar sales volume the firm must achieve to reach the break-even point?
Question 3: What is the degree of operating leverage for a production and sales level of 5,000 units for the firm?
Question 4: What will be the projected effect on earnings before interest and taxes if the firm's sales level should increase by 20 percent from the volume noted in part c?
Note: Please provide through step by step calculations.