Larimore Company sales are DH 560,000. The company has variable costs equal to 40% of sales and
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Question:
Larimore Company sales are DH 560,000. The company has variable costs equal to 40% of sales and total fixed costs of DH 150,000
Required:
a) What is the company's break-even point in sales dollars? (Show your workings)
b) Compute the company's net income and operating leverage (rounded to one decimal place) if sales increase by 10%. (Show your workings)
c) Describe the effect on operating leverage as a company's sales increase and it moves further beyond its break-even point.
d) Discuss the impact of the advertising cuts on the company's break-even point and margin of safety.
Related Book For
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
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