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

Thank you for the opportunity to help you with your question!

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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