A company has annual revenues of $5,000,000, fixed cost of $1,500,000, and variable cost of 30%...

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A company has annual revenues of $5,000,000, fixed cost of$1,500,000, and variable cost of 30% of annual revenues. A.) Whatare the expected profits? B.) What is the degree of operatingleverage? C.) If revenues are 40% below expectation, what is thepercent decrease in profits?

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4.1 Ratings (484 Votes)

A		$
	Revenue	5,000,000
	Variable Cost @30%	1,500,000
	Contribution	3,500,000
	Fixed Cost	1,500,000
	Expected Profits	2,000,000


B	Degree of Operating Leverage	Contribution/Operating Income
	3500000/2000000	1.75


C	Revenue are 40% below	3,000,000.0
	Variable Cost @30%	900,000
	Contribution	2,100,000
	Fixed Cost	1,500,000
	Expected Profits	600,000

	Change in profit	70.00%
		(2000000-600000)/2000000

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A company has annual revenues of $5,000,000, fixed cost of$1,500,000, and variable cost of 30% of annual revenues. A.) Whatare the expected profits? B.) What is the degree of operatingleverage? C.) If revenues are 40% below expectation, what is thepercent decrease in profits?

A company has annual revenues of $5,000,000, fixed cost of $1,500,000, and variable cost of 30%...

Free

70.2K

Verified Solution

Question

Finance

A company has annual revenues of $5,000,000, fixed cost of$1,500,000, and variable cost of 30% of annual revenues. A.) Whatare the expected profits? B.) What is the degree of operatingleverage? C.) If revenues are 40% below expectation, what is thepercent decrease in profits?

Answer & Explanation Solved by verified expert

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