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Unformatted text preview: from the 10,000-unit base level) and associated percentage changes in EBIT for the shifts in sales indicated in part b. d. On the basis of your findings in part c, comment on the sensitivity of changes in EBIT in response to changes in sales. LG2 12–8 Degree of operating leverage Grey Products has fixed operating costs of $380,000, variable operating costs of $16 per unit, and a selling price of $63.50 per unit. a. Calculate the operating breakeven point in units. b. Calculate the firm’s EBIT at 9,000, 10,000, and 11,000 units, respectively. c. With 10,000 units as a base, what are the percentage changes in units sold and EBIT as sales move from the base to the other sales levels used in part b? d. Use the percentages computed in part c to determine the degree of operating leverage (DOL). 548 PART 4 Long-Term Financial Decisions e. Use the formula for degree of operating leverage to determine the DOL at 10,000 units. 12–9 Degree of operating leverage—Graphical Levin Corporation has fixed operating costs of $72,000, variable operating cos...
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This document was uploaded on 01/19/2014.

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