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Unformatted text preview: 15-12A(Break-even point) You are a hard-working analyst in the office of financial operations for a manufacturing firm that produces a single product. You have developed the following cost structure information for this company. All of it pertains to an output level of 10 million units. Using this information, find the break-even point in units of output for the firm.Return on operating assets = 25%Operating asset turnover = 5 timesOperating assets = $20 millionDegree of operating leverage = 4 timesSolutionReturn on operating assets 25.00%Operating asset turnover 5Operating assets20 millionDegree of operating leverage 4Units Sold10 millionSales = operating asset turnover*operating assets100millionsProfit =operating assets*return5millionsAverage Sale Price=Sales/Total units sold10dollarsDOL = Q*C/(Q*C-F)Here DOL =4, Q=10million, C is contribution margin per unit, F is Fixed cost...
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This note was uploaded on 01/27/2009 for the course FIN FIN 370 taught by Professor Unknown during the Spring '09 term at University of Phoenix.
- Spring '09