Fickel Company has two manufacturing departments—Assembly and Testing & Packaging. The predetermined overhead rates in Assem
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Answer:
BEP units: 15,000 60-pounds bags
(B)
14,000 generates 6,000 loss
35,000 generates 120,000 net
(C) operating leverage: 2
(D) financial leverage: 1.63
(E) combined leverage: 3,26
Explanation:
60 pounds sales price = $ 15
60 pound cost: 60 x 0.15 = $ 9
Contribution Margin 6
Fixed Cost 90,000
BEP units: 15,000
(B) profit at given level:
sales x margin - fixed cost = net profit
14,000 x 6 - 90,000 = (6,000)
35,000 x 6 - 90,000 = 120,000
(C) operating leverage: change in EBIT / change in sales
income at 21,000 x 6 - 90,000 = 36,000
EBIT change:
120,000/36,000 = 3 + 1/3
Slaes change:
35,000/21,000 = 1 + 2/3
operating leverage:
(3 + 1/3) / (1 + 2/3) = 2
(d) financial leverage
<u>change in net income: </u>
(120,000 - 17,000) / (36,000 - 17,000)
103,000 / 19,000 = 103/19
<u>change in EBIT</u> 3 + 1/3 (already calculate
(103/19) / (3+1/3) = 1.626315789
(E) combined
2 x 1.626315789 = 3,252631578