Description
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
Explanation & Answer
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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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