FIN 370 Week 2 Individual Assignment - Chapter Study Questions

FIN 370 Week 2 Individual Assignment - Chapter Study Questions

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Unformatted text preview: 15-12A. Return on operating assets 25% Operating asset turnover Operating assets $20 (mil) Degree of operating leverage Operating asset turnover = Sales / Operating assets 5 = Sales / 20,000,000 Sales = 100,000,000 Return on operating assets = Net income / Operating assets 25% = Net income / 20,000,000 Net income = 5,000,000 DOL = (Sales - Variable Costs) / (Sales - Variable Costs - Fixed Costs) 4 = (100,000,000 - Variable Costs) / 5,000,000 20,000,000 = 100,000,000 - Variable Costs Variable Costs = 80,000,000 Fixed Costs = 15,000,000 Sales price per unit = 100,000,000 / 10,000,000 = 10 Breakeven point = 15,000,000 / (10 - 8) = 7.5 million units 5 4 ? 15-13A. Sale Price (per unit) Variable cost (per unit) Fixed Cost $180 $126 $540,000 1. What is the break-even point in units for the company? Breakeven Sales = Fixed costs / (sale price (per unit) - Variable cost (per unit)) Breakeven Sales = 10,000 units 2. What is the dollar sales volume the firm must achieve in order to reach the break-even point? Dollar Sales Volume = Break even Sales x Average price Dollar Sales Volume= $1,800,000 dollars 3. What would be the firm’s profit or loss at the following units of production sold: 12,000 units? 15,000 units? 20,000 Unit Sales 12000 15000 20000 Price Sales Revenue Fixed Costs Variable Costs Total Costs Sales * Price Varaible Cost * Sales 180 2160000 540000 1512000 2052000 180 2700000 540000 1890000 2430000 180 3600000 540000 2520000 3060000 4. Find the degree of operating leverage for the production and sales levels given in part (c). DOL = Q( P − V ) Q( P − V ) − F $180 $540,000 $126 6.00 3.00 2.00 P is Average Price F is Fixed Costs V is Variable Costs Unit Sales DOL 12000 15000 20000 he break-even point? n sold: 12,000 units? 15,000 units? 20,000 units? Profit Total Costs-Sales Revenue 108000 270000 540000 given in part (c). ...
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This note was uploaded on 02/21/2011 for the course FIN 370 taught by Professor Unknown during the Spring '08 term at University of Phoenix.

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FIN 370 Week 2 Individual Assignment - Chapter Study Questions

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