Question

Elina Siljander owns Elina's Stained Glass in Helsinki, Finland. The business produces and sells three different types of stained glass windows: small, medium, and large Elina has two full-time employees who work regular schedules to cut glass and assemble the windows. She borrowed money from the bank to start the business and pay living expenses. She is concerned that her cash flows might not be high enough either to pay herself or to repay the bank loan. She would like to generate approximately 10,000 in pretax earnings each month to cover her living expenses and repay the loan The following revenue and cost information covers the past four months: June July August September 16,116 Revenues 9,050 10,531 12,946 Raw materials and supplies 1,745 2,433 3,074 3,880 4,041 4,246 2,000 2,000 2,000 747 900 1,356 2,879 Labour Rent Miscellaneous Profit 4,029 4,282 2,200 793 4,812 525 701 Develop a cost function for Elina's Stained Glass. (Round answers to 0 decimal places, e.g. 15 or 15%.) Cost function: Total Cost % of revenues LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT Determine the level of revenue Elina's Stained Glass must generate to achieve the targeted profit of 10,000 per month. (Round answer to 0 decimal places, e.g 125.) Level of revenue for targeted profit

Answer 1

The cost equation can be found by plotting the total cost against revenue and using the equation for trendline.

Degree of operating leverage (DOL) can be calculated as follows:

DOL =(Sales -Variable Cost) / (Sales - Variable Costs -Fixed Cost)