A new cafeteria is ready to open for business at Florida Hospital Orlando. It is estimated that the food cost (variable cost) will be 40% of sales, while fixed cost will be $540,000. The first year's sales estimates are $1,500,000. The cost of the facility was financed with debt at 4.5%. Interest expense for the first year is expected to be $90,000. (PLEASE SHOW YOUR WORK).
a) Compute and interpret the first year expected degree of operating leverage (DOL)
b) Compute and interpret the degree of financial leverage (DFL)
c) Compute the Operating Break-even point in dollars.