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2) Grey Products has fixed operating costs of $380,000, variable operating costs of $18 per unit,...

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Finance

2) Grey Products has fixed operating costs of $380,000, variableoperating costs of $18 per unit, and a selling price of $65 perunit.

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 changesin units sold and EBIT as sales move from the base to the othersales levels used in part 2?

d.Use the percentages computed in part 3 to determine thedegree of operating leverage (DOL).

e.Use the formula for the degree of operating leverage todetermine the DOL at 10,000 units.

Answer & Explanation Solved by verified expert
3.6 Ratings (584 Votes)
a Calculation of operating breakeven point in units Operating breakeven points Fixed costsContribution margin per unit Contribution margin per unit Sales price Variable costs Contribution margin per unit 65 18 Contribution    See Answer
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Transcribed Image Text

2) Grey Products has fixed operating costs of $380,000, variableoperating costs of $18 per unit, and a selling price of $65 perunit.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 changesin units sold and EBIT as sales move from the base to the othersales levels used in part 2?d.Use the percentages computed in part 3 to determine thedegree of operating leverage (DOL).e.Use the formula for the degree of operating leverage todetermine the DOL at 10,000 units.

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