Degree of operating leverage, Accounting Basics

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Degree of operating leverage

Problem:

A proposed project has fixed costs of $90,000 per year. The operating cash flow at 4,700 units is $96,000. Ignoring the effect of taxes,

Required:

Question 1: What is the degree of operating leverage?

Question 2: If units sold rise from 4,700 to 5,200, what will be the new operating cash flow?

Question 3: What is the new degree of operating leverage?

Note: Explain all steps comprehensively.

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Accounting Basics: Degree of operating leverage

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Accounting Basics: Degree of operating leverage

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