capita basis. We can test this by moving the $160,635 talent cost to the VC. In this case we see that fixed
costs make up only 35.25% of total cost and therefore the breakeven point will be much lower than in
the previous example.
Another way to determine the importance of the breakeven point analysis is to calculate the Degree of
Operating Leverage. This is done in part 7. As we can see, the DOL for the higher fixed cost is 4.93. This
means that for each 1% of change in sales, the operating profit would change by 4.93%. In the other
case, the DOL is 2.53. This change applies to lost sales as well and in the high fixed cost case, we would
lose 4.93% in profit, for each 1% of lost sales so we would reach the breakeven point much quicker.
Sensitivity Analysis understanding uncertainty of events
There are several ways to perform a sensitivity analysis. The most common way is a “what-if” analysis. In
the case of ALLTEL, 2 scenarios were chosen. The first scenario (part 8, section a), shows how the