Percentage effect which increase in output

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Q. Company XYZ produces cellular phones brand GREENBERRY, at a yearly rate of 500,000 units. Its total fixed costs are $6 million per year, and at its current rate of o/p, its total variable costs for the year will be 80 million. The price of the GREENBERRY is $450. What is the degree of operating leverage for the GREENBERRY?

Company XYZ produces a product Alpha that has a degree of operating leverage of +3.5. Suppose a new order is received, and, the rate of output is increased by 10%. The percentage effect which increase in output will have on the profit made from producing and selling commodity Alpha will be.

Reference no: EM137944

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