At an output level of 60,000 units, you calculate that the degree of operating leverage is...
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At an output level of 60,000 units, you calculate that the degree of operating leverage is 3.20. Suppose fixed costs are $200,000. What is the operating cash flow at 54,000 units? (Do not round intermediate calculations and round your final answer to the nearest whole number, e.g., 32.) |
| Operating cash flow | $ |
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What is the new degree of operating leverage? (Do not round intermediate calculations and round your final answer to 3 decimal places, e.g., 32.161.) |
| Degree of operating leverage |
Homework Answers
Degree of operating leverage
= Contribution margin / (Contribution margin - Fixed expenses)
Let contribution margin be x
x/(x-200,000) = 3.20
x = 3.20x - 640,000
x = 290,909.09
Contribution margin pu = x/60,000 = 4.84848
Contribution margin for 54000 = 261,818.18
Operating cash flow = (54,000 * 5.84848 - 200,000) = 61,818.18
Degree of operating leverage = 4.24
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