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What are the implication of the Safety margin

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Reference no: EM132857143

Problem - The following is extracted summary of Income statement of Sambusha Bhd.

Revenue RM2,345,550.00

Less Variable Costs RM1,645,230.00

Contribution Margin RM700,320.00

Less Fixed Costs (Overheads) RM360,300.00

Finance costs RM65,200.00

Operating Profit RM274,820.00

Less Taxation @24% RM65,956.68

Profit after tax RM208,863.32

Required -

a. The board of directors wants to know what is the level of break-even point for the company's operation.

b. The board also wants to know how safe the operation level is.

c. The board wants to know what is the degree of operating leverage (DOL) of the company and what it means to the company.

d. What is the Degree of Financial Leverage (DFL).

e. What are the implication of the Safety margin, DOL, DFL and Degree of Combined Leverage (DCL) to the company prospect?

Reference no: EM132857143

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