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Degree of operating leverage. Grey Products has fixed operating costs of $380,000, variable operating costs of $16 per unit, and a selling price of $63.50 per unit. a. Calculate the operating breakeven point in units. b. Calculate the firm's EBIT at 9,000, 10,000, and 11,000 units, respectively. c. With 10,000 units as a base, what are the percentage changes in units sold and EBIT as sales move from the base to the sales levels of 9.000 and 11,000 units, respectively? d. Use the percentages computed in partc to determine the degree of operating leverage (DOL). e. Use the formula for degree of operating leverage to determine the DOL at 10,000 units. Solution a. Calculate the operating breakeven point in units. Selling price Variable operating costs Fixed operating costs Operating breakeven point $63,500 $16,00 $380 000 b. Calculate the firm's EBIT at 9,000, 10,000, and 11,000 units, respectively. 9 000 10 000 11 000 Units Sales Less: Variable costs Less: Fixed costs EBIT $380 000 $380 000 $380 000 b. Calculate the firm's EBIT at 9.000, 10,000, and 11,000 units, respectively. 9000 10 000 11 000 Units Sales Less: Variable costs Less: Fixed costs EBIT $380 000 $380 000 $380 000 c. With 10,000 units as a base, what are the percentage changes in units sold and EBIT as sales move from the base to the sales levels of 9,000 and 11,000 units, respectively? 9 000 10 000 11 000 Units Change in unit sales % change in unit sales Change in EBIT % change in EBIT 0% 0% d. Use the percentages computed in partc to determine the degree of operating leverage (DOL). Degree of operating leverage e. Use the formula for degree of operating leverage to determine the DOL at 10.000 units. Units Selling price Variable operating costs Fixed operating costs Degree of operating leverage 10 000 $63,50 $16,00 $380 000 Degree of operating leverage. Grey Products has fixed operating costs of $380,000, variable operating costs of $16 per unit, and a selling price of $63.50 per unit. a. Calculate the operating breakeven point in units. b. Calculate the firm's EBIT at 9,000, 10,000, and 11,000 units, respectively. c. With 10,000 units as a base, what are the percentage changes in units sold and EBIT as sales move from the base to the sales levels of 9.000 and 11,000 units, respectively? d. Use the percentages computed in partc to determine the degree of operating leverage (DOL). e. Use the formula for degree of operating leverage to determine the DOL at 10,000 units. Solution a. Calculate the operating breakeven point in units. Selling price Variable operating costs Fixed operating costs Operating breakeven point $63,500 $16,00 $380 000 b. Calculate the firm's EBIT at 9,000, 10,000, and 11,000 units, respectively. 9 000 10 000 11 000 Units Sales Less: Variable costs Less: Fixed costs EBIT $380 000 $380 000 $380 000 b. Calculate the firm's EBIT at 9.000, 10,000, and 11,000 units, respectively. 9000 10 000 11 000 Units Sales Less: Variable costs Less: Fixed costs EBIT $380 000 $380 000 $380 000 c. With 10,000 units as a base, what are the percentage changes in units sold and EBIT as sales move from the base to the sales levels of 9,000 and 11,000 units, respectively? 9 000 10 000 11 000 Units Change in unit sales % change in unit sales Change in EBIT % change in EBIT 0% 0% d. Use the percentages computed in partc to determine the degree of operating leverage (DOL). Degree of operating leverage e. Use the formula for degree of operating leverage to determine the DOL at 10.000 units. Units Selling price Variable operating costs Fixed operating costs Degree of operating leverage 10 000 $63,50 $16,00 $380 000