Degree of operating leverage-degree of financial leverage


Sales (30,000 units)          $150,000
Variable costs                    100,800
Contributions margin         $ 49,200
Fixed manufacturing costs    24,000
Operating Income             $ 25,200
Interest                              18,000
Earnings Before Taxes        $ 7,200
Taxes (30%)                        2,160
Net Income                       $ 5,040
Shares Outstanding                 600

1) This firm's break-even point is:

A) 4,800 units
B) 14,634 units
C) 7,142 units
D) 18,000 units

2) The Degree of Operating Leverage (DOL) is

A) 1.58x
B) 1.95x
C) 3.50x
D) 1.40x

3) The Degree of Financial Leverage (DFL) is

A) 3.50x
B) 1.40x
C) 1.95x
D) 1.58x

4) The Degree of Combined Leverage (D.C.L.) is

A) 3.08x
B) 5.45x
C) 2.73x
D) 6.83x

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Finance Basics: Degree of operating leverage-degree of financial leverage
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