Reference no: EM132932874

Your business plan for your proposed start-up firm envisions first-year revenues of $120,000, fixed costs of $61,000, and variable costs equal to one-third of revenue.

a.What are expected profits based on these expectations? (Omit the "tiny_mce_markerquot; sign in your response.)

Expected profit $

b.What is the degree of operating leverage based on the estimate of fixed costs and expected profits? (Round your answer to 2 decimal places.)
Degree of operating leverage

c.If sales are 10% below expectation, what will be the decrease in profits? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Decrease in profits %

d.Based on the DOL, what is the largest percentage shortfall in sales relative to original expectations that the firm can sustain before profits turn negative? What are break-even sales at this point? (Round "Shortfall" answer to 2 decimal places. Omit the "$ & %" signs in your response.)

Shortfall %

Break-even sales $