Calculating break-even and operating leverage

Reference no: EM1366934

9. Break-Even. Dime a Dozen Diamonds creates synthetic diamonds through treating carbon. every diamond can be sold for $100. The materials cost for a standard diamond is $30. The fixed costs incurred each year for factory upkeep and administrative expenses are $200,000. The machinery costs $1 million and is depreciated straight-line over 10 years to a salvage value of zero.

21. Operating Leverage. A project has fixed costs of $1,000 per year, depreciation charges of $500 a year, revenue of $6,000 a year, and variable costs equal to two-thirds of revenues.
a. If sales increase by 5 percent, what will be the increase in pretax profits?
b. What is the degree of operating leverage of this project?
c. Confirm that the percentage change in profits equals DOL times the percentage change in sales.

The government's only concession was to put a floor on the underwriters losses by giving them the option to resell their stock to the government at $2.80 a share. The BP offering is described and analyzed in C. Muscarella and M. Vetsuypens, "The British Petroleum Stock Offering: An Application of Option Pricing", Journal of Applied Corporate Finance1 (1989), pp. 74-80.

Reference no: EM1366934

Questions Cloud

Concepts of compassion fatigue : Recognize the warning signs for at least five concepts of compassion fatigue. Present the nature of the problems and their causes.

Improve listening skills and understanding body language : Explain how can we as managers/leaders use body language to communicate leadership

Determine order that breadth first search will expand nodes : Determine the order that breadth first search will expand the nodes? S,A,B,D,C,E,G. What is the order that depth first search will expand nodes? S,B,E,F,D,G

Determining determinants of demand : Suppose your product is Wendy's hamburgers. First "draw" the demand and suppy curve and see how the equilibrium price and quantity is determeined.

Calculating break-even and operating leverage : Dime a Dozen Diamonds creates synthetic diamonds through treating carbon. every diamond can be sold for $100. The materials cost for a standard diamond is $30.

Mobilizing community partnerships : Mobilize Community Partnerships to recognize and Solve Health Problems, please help me explain in detail, the strengths of this standard in addition to one potential improvement as a result of this standard.

Explain ethics of developing type of system : Number of citizens and their actions. Clearly this has privacy, implications. Explain the ethics of developing this type of system.

Influencing the future of public health : How do you think this will affecting the future of public health? What advantages and challenges might develop?

Explain client-server architecture for serving client on pc : When people explain client-server architecture, they are usually referring to a system in which a large server is serving a client on a PC. With X Window, reverse is frequently the case. Explain

User Account

All Pages