Heat Tamers, Inc., of Bend, Oregon produces special heat-resistant boots used primarily by fire fighters, smoke-jumpers and steelworkers. It is contemplating an expansion into the heat resistant leather market charging a price of $150 per pair of boots. The production of each pair of boots would require $60 in materials; 1.5 hours of labor at the rate of $20 per hour; and energy, supervisory & other variable overhead costs would amount to $25 per unit. The accounting department has derived an allocated fixed overhead charge of $30 per pair of boots (at a projected volume of 280,000 pairs).
A) What is Heat Tamers' breakeven sales volume (in pairs) for heat-resistant boots?
B) Calculate the degree of operating leverage at a projected volume of 280,000 units.
C) Interpret the DOL value you found in part B.