Play-More Toys produces inflatable beach? balls, selling 380,000 balls per year. Each ball produced has a variable operating cost of $ 0.89 and sells for $1.24.
Fixed operating costs are $34,000.
The firm has annual interest charges of $6,400?,
preferred dividends of $1,500?, and a 40% tax rate.
a. Calculate the operating breakeven point in units.
b. Use the degree of operating leverage? (DOL) formula to calculate DOL.
c. Use the degree of financial leverage? (DFL) formula to calculate DFL.
d. Use the degree of total leverage? (DTL) formula to calculate DTL. Compare this to product of DOL and DFL calculated in parts ?(b?) and ?(c?).
Acutal Questions
a. The operating breakeven point in units is units. ?(Round to the nearest? integer.)
b. The degree of operating leverage is ? (Round to four decimal? places.)
c. The degree of financial leverage is ?(Round to four decimal? places.)
d. The degree of total leverage is ?(Round your answer to two decimal? places.)
Compare this to the product of DOL and DFL calculated in parts ?(b?) and? (c?).
The degree of total leverage is (Round your answer to two decimal? places.)