What is the degree of combined leverage for this question?

Business & Finance
Tutor: None Selected Time limit: 1 Day

Haunted Forest, Inc.is selling fog machines.

Use the following information about Haunted Forest, Inc. to answer the following questions.

Average selling price per unit $301.

Variable cost per unit $203

Units sold 353

Fixed costs $15,279

Interest expense $4,190

 Based on the data above, what is the degree of total (combined) leverage of Haunted Forest, Inc.?

Round the answer to two decimals

Oct 3rd, 2015

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Haunted Forest, Inc.is selling fog machines.

Use the following information about Haunted Forest, Inc. to answer the following questions.

Average selling price per unit $301.

Variable cost per unit $203

Units sold 353

Fixed costs $15,279

Interest expense $4,190

 Based on the data above, what is the degree of total (combined) leverage of Haunted Forest, Inc.?

Round the answer to two decimals


Answer

DFL = Q(P-V)-FC/[ Q(P-V)-FC-IE]

DFL = 353 x (301-203)-$15,279/[353 x (301-203)-$15,279-$4,190]

DFL = $19,315 /[$19,315-$4,190]

DFL = $19,315 /$15,125

DFL = 1.28

DOL = Q(P-V)/ /[ Q(P-V)-FC]

DOL = 353 x (301-203)/[ 353 x (301-203)-$15,279]

DOL = $34,594/ $19,315

DOL = 1.79

Total Combine leverage = DOL x DFL

Total Combine leverage = 1.79 x 1.28

Total Combine leverage = 2.29


All answer are rounded to two decimal place .


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Oct 3rd, 2015

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