What is the degree of operating leverage

Assignment Help Financial Management
Reference no: EM131842374

United Snack Company sells 40-pound bags of peanuts to university dormitories for $30 a bag. The fixed costs of this operation are $321,200, while the variable costs of peanuts are $0.20 per pound.

a. What is the break-even point in bags?

Break-Even Point _______ bags

b. Calculate the profit or loss (EBIT) on 10,000 bags and on 23,000 bags.

10,000____

23,000____

c. What is the degree of operating leverage at 18,000 bags and at 23,000 bags? (Round your answers to 2 decimal places.)

18,000____

23,000____

d. If United Snack Company has an annual interest expense of $20,000, calculate the degree of financial leverage at both 18,000 and 23,000 bags. (Round your answers to 2 decimal places.)

18,000____

23,000_____

e. What is the degree of combined leverage at both a sales level of 18,000 bags and 23,000 bags? (Round your answers to 2 decimal places.)

18,000____

23,000_____

Reference no: EM131842374

Questions Cloud

Debilitation and planning fit with free will : How does Morality, regret, debilitation and planning fit with free will.Basic writing
Briefly rehearse the basic gist of aristotle : Briefly rehearse the basic gist of Aristotle's "function argument," making sure to state its conclusion as well as the reasoning Aristotle gives to support it.
Is torture ever acceptable : Is torture ever acceptable? (This is an essay question of not less than 200). I need tips to on how to answer the question. It is a critical reasoning question.
Which inductive generalization is stronger : Our university's women's basketball team has won its last three games. Thus, it seems obvious that the team will repeat as champions this year.
What is the degree of operating leverage : What is the break-even point in bags? What is the degree of operating leverage at 18,000 bags and at 23,000 bags?
Why does the presence of an STI greatly increase the risk : Discuss why there is no typical STI patient. Why does the presence of an STI greatly increase the risk of HIV transmission?
Formulation of the categorical imperative : Briefly state the "humanity as an end in itself" formulation of the Categorical Imperative (also known as the "human dignity" or "intrinsic worth" formulation
Philosophical discussion of religion : What place do you think questions of religion hold in philosophical discussion? Do you see value in discussing religion philosophically? Why or why not?
Describe any of the experiences : Remember, do not describe any of the experiences, ideas, thoughts, or feelings that the self has, describe that self that has those experiences, ideas, thoughts

Reviews

Write a Review

Financial Management Questions & Answers

  What is percentage after-tax cost of debt

If the firm’s tax bracket is 30%, what is its percentage after-tax cost of debt?

  Federal statutory tax rate

How is it possible for a U.S. firm to have an effective tax rate that is less than the U.S. federal statutory tax rate?

  Consumer role in the decision-making process

Some of the articles available on the matter of health care mergers bemoan the absence of a patient/consumer role in the decision-making process. Should consumers have a role in the decision of “to merge or not to merge”? Where/how could that role be..

  Evaluate the percentage of the food that fails inspection

Compute two variances that can be used to evaluate the percentage of the food that fails the inspection.

  Create excitement about the launch of a new product

One common use of product placement is to help create excitement about the launch of a new product. Implicit celebrity endorsements and authenticity are key issues to consider when judging placement opportunities.

  Abolishing tax-deductibility of interest-payments

In the Netherlands the corporate tax rate is 25.5%. Suppose each and every year the EBIT of a firm is X million (X>0) and the constant annual interest-payments equal μ*X million, where 0

  What is this firm debt-equity ratio

Jiminy Cricket Removal has a profit margin of 11 percent, total asset turnover of 1.01, and ROE of 14.45 percent. What is this firm’s equity multiplier? What is this firm’s debt-equity ratio?

  What impact did the shift have on established companies

What impact did the shift have on established companies and on new entrants to the industry?

  A project has the cash flows

A project has the following cash flows: Year Cash Flow 0 –$ 16,100 1 6,800 2 8,100 3 6,600 What is the NPV at a discount rate of zero percent? NPV $ What is the NPV at a discount rate of 11 percent? What is the NPV at a discount rate of 29 percent?

  Your bank account pays nominal rate of interest

Your bank account pays an 8% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT?

  How should the option be valued

If the yield volatility for a 5-year put option on a bond maturing in 10 years time is specified as 22%, how should the option be valued?

  What is the true annual interest rate on the loan

A firm purchases 100 acres of land for $200,000 and agrees to remit 20 equal annual end-of-year installments of $41,067 each. What is the true annual interest rate on this loan?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd