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Show all your work (use of formula, etc.) in solving the problems. You still need to...

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Finance

Show all your work (use of formula, etc.) in solving theproblems. You still need to show your work even if you use thefinancial calculator to get the answers. Please do not useexcel.

2. At an output level of 2,000 units, you calculate that thedegree of operating leverage is 3. Fixed costs are $35,000.

(a) If output rises to 2,500 units, calculate the percentagechange in OCF, new OCF and new DOL.

(b) If output falls to 1,500 units, calculate the percentagechange in OCF, new OCF and new DOL. (hint: start by finding the OCFat 2,000 units using DOL equation of 1+ FC/OCF)

Answer & Explanation Solved by verified expert
4.5 Ratings (948 Votes)
Output Level 2000 units Degree of Operating Leverage 3 Fixed Costs 35000 Degree of Operating Leverage 1 Fixed Costs Operating Cash Flows 3 1 35000 Operating Cash Flows 2 35000 Operating Cash Flows Operating Cash Flows 17500 Answer a Change in Output Level    See Answer
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Transcribed Image Text

Show all your work (use of formula, etc.) in solving theproblems. You still need to show your work even if you use thefinancial calculator to get the answers. Please do not useexcel.2. At an output level of 2,000 units, you calculate that thedegree of operating leverage is 3. Fixed costs are $35,000.(a) If output rises to 2,500 units, calculate the percentagechange in OCF, new OCF and new DOL.(b) If output falls to 1,500 units, calculate the percentagechange in OCF, new OCF and new DOL. (hint: start by finding the OCFat 2,000 units using DOL equation of 1+ FC/OCF)

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