U.S Steal Income Statement Data Units Sold Total VC Fixed Costs Total Costs Tota
ID: 2692858 • Letter: U
Question
U.S Steal Income Statement Data Units Sold Total VC Fixed Costs Total Costs Total Revenue Operating Income 40,000 $80,000 $50,000 $130,000 $160,000 $30,000 60,000 $120,000 $50,000 $170,000 $240,000 $70,000 Solution: a)Show your work!
DOL =
b) Q =
P =
VC =
DOL =
U.S Steal Income Statement Data Units Sold Total VC Fixed Costs Total Costs Total Revenue Operating Income 40,000 $80,000 $50,000 $130,000 $160,000 $30,000 60,000 $120,000 $50,000 $170,000 $240,000 $70,000 Solution: a)
Show your work!
DOL =
b) Q =
P =
VC =
DOL =
Explanation / Answer
The formula for calculating the DOL ( Degree of Operating leverage) is DOL = Contribution margin / Net operating income According to the given information, P = Average sales price per unit of Output Q = Units of output VC = Variable cost per unit DOL = Degree of Operating levergae CAlculating the Degree of Operating leverage for the first case: P = Total sales revenue / Total units = $160,000 / 40,000 = $4 Q = 40,000 units VC = $80,000 / 40,000 = $2 Total fixed costs = $50,000 Net Operating income or EBIT = $30,000 First we have to calculate the value of Contribution margin Contribution margin = SAles - Variable cost = $160,000 - $80,000 = $80,000 DOL = $80,000 / $30,000 = 2.67 times Therefore, the DOL for the first case is 2.67 times CAlculating the Degree of Operating leverage for the second case: P = Total sales revenue / Total units = $240,000 / 60,000 = $4 Q = 60,000 units VC = $120,000 / 60,000 = $2 Total fixed costs = $50,000 Net Operating income or EBIT = $70,000 First we have to calculate the value of Contribution margin Contribution margin = SAles - Variable cost = $240,000 - $120,000 = $120,000 DOL = $120,000 / $70,000 = 1.71times Therefore, the Degree of Operating leverage for the second case is 1.71 times. P = Total sales revenue / Total units = $240,000 / 60,000 = $4 Q = 60,000 units VC = $120,000 / 60,000 = $2 Total fixed costs = $50,000 Net Operating income or EBIT = $70,000 First we have to calculate the value of Contribution margin Contribution margin = SAles - Variable cost = $240,000 - $120,000 = $120,000 DOL = $120,000 / $70,000 = 1.71times Therefore, the Degree of Operating leverage for the second case is 1.71 times.Related Questions
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