Problem:
Cullum Creations produces hand warmers, selling 400,000 warmers a year. Each warmer produced has a variable operating cost of $0.84 and sells for $1.00. Fixed operating costs are $28,000. The firm has annual interest charges of $6,000, preferred dividends of $2,000, and a 40% tax rate.
Requirement:
Question 1: Calculate the operating breakeven point in units
Question 2: Use the degree of operating leverage (DOL) formula to calculate DOL.
Question 3: Use the degree of financial leverage (DFL) formula to calculate DFL.
Question 4: Use the degree of total leverage (DTL) formula to calculate DTL.
Note: Explain all steps comprehensively.