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83.Kurt Neal and Son is considering a project with a discounted payback just equal to the project’s life. The projections include a sales price of $11, variable cost per unit of $8.50, and fixed costs of $4,500. The operating cash flow is $6,200. What is the break-even quantity?a.1,800 unitsb.2,480 unitsc.3,057 unitsd.3,750 unitse.4,280 units
CHAPTER 11OPERATING LEVERAGEb84.Ralph is in charge of a project that has a degree of operating leverage of 2.5. What will happen to the operating cash flows if Ralph increases the number of units sold by 5 percent?85.Ann Marie has noted that every time the sales quantity increases by 3 percent for a particular project, the operating cash flow for the project increases by 5 percent. What is the degree of operating leverage for this project if the contribution margin is $4?86.The fixed costs of a project are $8,000. The depreciation expense is $3,500 and the operating cash flow is $20,000. What is the degree of operating leverage for this project?87.Webster and Words manage a product with a 3.5 degree of operating leverage. Sales of the product are expected to decline by 15 percent next year. What is the expected change in the operating cash flow for this product for next year?a.increase by 23.3 percentb.increase by 52.5 percentc.decrease by 4.3 percentd.decrease by 23.3 percente.decrease by 52.5 percent
CHAPTER 11IV.ESSAYSOPERATING LEVERAGE88.What is operating leverage and why is it important in the analysis of capital expenditure projects?FORECASTING ERROR89.What is “forecasting error?” Why is it important to the analysis of capital expenditure projects?90.How do the accounting, cash, and financial break-even points differ from one another?