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Compute the degree of operating leverage

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Question - Clark's manufactures comfortable women footwear to be worn during office hours. The financial information related to the company is provided below:

Selling price per unit = $20

Variable cost of production = $6 per unit

Fixed cost for the year = $10,000

No of units to be sold next year = 1,000 pairs

Income taxes = 20%

a) Calculate the breakeven point in units.

b) Calculate the breakeven point in dollars.

c) How many units must the company sell to reach a target net profit of $16,000?

d) Compute the margin of safety in both dollar and percentage terms.

e) Compute the degree of operating leverage.

f) If sales (units) increase by 20% in the following year, how much would net income increase?

Reference no: EM133138489

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