Chapter $5$ Break Even and Leverage Worksheet

$1.$ Enco Manufacturing makes hinges to be sold to other production companies. It has $$25,000$ a

year in fixed costs. The hinges cost Enco $$\mathrm{.}05$ to produce and it sells them for $$\mathrm{.}17.$ What is the

breakeven point in number of units?

$2.$ If Enco Manufacturing sells $250,000$ hinges this year, how much operating leverage does it have?

$3.$ Assume Enco Manufacturing sells $300,000$ hinges this year and has interest expense of $$5,000.$

What is its degree of operating leverage, financial leverage, and combined leverage?

$4.$ Lady Anne products put together make$-$up packages to be sold to department stores. The firm

sells these packages for $$8\mathrm{.}00$ each; variable costs are $75\%$ of the Retail Price. Fixed costs are

$$375,000.$

a$.$ Determine the breakeven point in number of units.

b$.$ Determine the number of units to be sold if the profit goal is $$100,000.$

c$.$ If the goal is met, what will be the Degree of Operating Leverage?

d$.$ If Interest Expense is $$20,000,$ what is the Degree of Financial Leverage?

e$.$ Determine the Degree of Combined Leverage?

$5.$ Jones Marble Co$.$ sells marble blocks to decorators for $$1,000$ each. It sells $4,500$ blocks a year

with variable costs of $$700$ per block. Fixed costs are $$875,000$ with Interest Expense of

$$150,000.$

a$.$ Determine the breakeven point in number of units.

b$.$ Determine the Degree of Operating Leverage.

c$.$ Determine the Degree of Financial Leverage.

d$.$ Determine the Degree of Combined Leverage.