(Operating

leverage)

The C. M. Quarles Distributing Company manufactures an assortment of cold air intake systems for high-performance engines. The average selling price for the various units is

$650.

The associated variable cost is

$400

per unit. Fixed costs for the firm average

$170,000

annually.

a. What is the break-even point in units for the company?

b. What is the dollar sales volume the firm must achieve to reach the break-even point?

c. What is the degree of operating leverage for a production and sales level of

3,000

units for the firm? (Calculate to three decimal places.)

d. What will be the projected effect on earnings before interest and taxes if the firm's sales level should increase by

50

percent from the volume noted in part

c?

Question content area bottom

Part 1

a. What is the break-even point in units for the company?

enter your response here

units(Round to the nearest whole number.)

Part 2

b. What is the dollar sales volume the firm must achieve to reach the break-even point?

$enter your response here

(Round to the nearest cent.)

Part 3

c. What is the degree of operating leverage for a production and sales level of

3,000

units for the firm? Note that you can compare sales at a 10% higher level

(3,300

units) in detemining the degree of operating leverage.

enter your response here

(Round to three decimal places.)

Part 4

d. What will be the projected percentage change in earnings before interest and taxes if the firm's sales level should increase by

50

percent from the volume noted in part

c?

enter your response here%

(Round to two decimal places.)