Question: Consider the previous question with the following new information: Fixed costs are assumed to be $500,000 per year. The company estimates the variable cost per

Consider the previous question with the following new information: Fixed costs are assumed to be $500,000 per year. The company estimates the variable cost per unit (v) to be $75 and expects to sell each unit for $425. There are no taxes and the required rate of return is 22% per year. Suppose that sales are currently estimated to be 5000 units per year.

What is the degree of operating leverage? (Round to 1 decimal place, ie 2.3)

Using your answer from above, estimate what the new monthly operating cash flow (OCF) will be if sales increase by 100 units: $ (Round your answer to the nearest whole dollar, and do NOT use commas in your response, ie. 456789)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!