What is the total combined leverage?

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 $325.

Variable cost per unit $187

Units sold 369

Fixed costs $15,287

Interest expense $4,183

 Based on the data above, what will be the resulting percentage change in earnings per share if they expect units produced and sold to change -2.9 percent?

Round the answer to two decimals

Oct 3rd, 2015

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

Please download the solution file  EPS.xlsx

earnings per share decrease by 4.70% .

If you need more help chat is available for you to discuss this concept.

Please let me know if you need any clarification. I'm always happy to answer your questions.
Oct 3rd, 2015

hi, what did you calculate to get -4.70?

Oct 4th, 2015

Degree of total leverage = Contribution margin / Earning before tax

Degree of total leverage =  $50,922/ $31,452 = 1.62

Change in EPS = Degree of total leverage  x Percentage change in Sales

Change in EPS = 1.62 x -2.9% = -4.70%

I hope, it will helpful for you.

Oct 4th, 2015

Thank you. This helped a lot!

Oct 4th, 2015

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