129 degree of operating leveragegraphical levin

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Unformatted text preview: ts of $6.75 per unit, and a selling price of $9.75 per unit. a. Calculate the operating breakeven point in units. b. Compute the degree of operating leverage (DOL) for the following unit sales levels: 25,000, 30,000, 40,000. Use the formula given in the chapter. c. Graph the DOL figures that you computed in part b (on the y axis) against sales levels (on the x axis). d. Compute the degree of operating leverage at 24,000 units; add this point to your graph. e. What principle do your graph and figures illustrate? LG2 12–10 EPS calculations Southland Industries has $60,000 of 16% (annual interest) bonds outstanding, 1,500 shares of preferred stock paying an annual dividend of $5 per share, and 4,000 shares of common stock outstanding. Assuming that the firm has a 40% tax rate, compute earnings per share (EPS) for the following levels of EBIT: a. $24,600 b. $30,600 c. $35,000 LG2 12–11 Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting...
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