Calculate financial leverage gain or loss for the year

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Assume the following: Company B's Sources of Capital: See table for Company B's operating profit performance for the year. The business paid $480,000 interest for the year. Calculate its financial leverage gain (or loss) for the year.

 

Company B

Company C

 

Totals

Per Unit

Totals

Per Unit

Sales volume, in units

50,000

 

1,500,000

 

Sales revenue

$15,000,000

$300.00

$36,000,000

$24.00

Cost of goods sold expense

$7,500,000

$150.00

$27,000,000

$18.00

Gross margin

$7,500,000

$150.00

$9,000,000

$6.00

Variable operating expenses

$3,750,000

$75.00

$4,200,000

$2.80

Contribution margin

$3,750,000

$75.00

$4,800,000

$3.20

Fixed operating expenses

$1,950,000

$39.00

$3,000,000

$2.00

Operating profit

$1,800,000

$36.00

$1,800,000

$1.20

 

 

Reference no: EM13534424

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