Oscar Inc. has a new product priced at $650 per unit. Variable cost is $350 per unit,
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Question:
Oscar Inc. has a new product priced at $650 per unit. Variable cost is $350 per unit, and fixed costs are $300,000 per year. Quantity sold is expected to be 15,000 units per year. The new product will require an initial investment of $16 million, depreciation will be straight-line to zero for eight years, and salvage at the end of eight years is expected to be $2 million. Demand for the product is expected to be stable and to continue for eight years. The required rate of return on this new product line is 12%. What is the degree of operating leverage at the expected quantity sold of 15,000 units?
a. 1.01
b. 1.03
c. 1.05
d. 1.07
e. 1.09
Related Book For
Financial and Managerial Accounting
ISBN: 978-0538480895
11th Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren
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