Calculate the degree of operating leverage

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Problem - You are thinking about opening a new clinic in your home town. Your financial projections for the first year of operations are as follows:

Sales (10,000 visits) 500,000

Wages 220,000 fixed

Rent 5,000 fixed

Depreciation 30,000 fixed

Utilities 2,500 fixed

Supplies 50,000 variable

Assume a tax rate of 21%.

Required -

1. Prepare an internal Income Statement.

2. Calculate Break-Even in units and in Sales Dollars.

3. What number of visits is required to provide a target of $100,000 before tax?

4. What number of visits is required to provide a target of $100,000 after tax?

5. Calculate the degree of operating leverage?

Reference no: EM132714913

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