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What is the degree of operating leverage

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Bintumani Mountain Apparatus Inc. produces tents at variable costs of $56 per tent. The fixed costs for the production are $99,850. The company sells tents to outdoor stores for $149 per tent.

a) How many tents does Bintumani Mountain Apparatus Inc. need to sell in order to break even? (Round UP result to whole dollars; No decimals).

b) What is the degree of operating leverage (DOL) at 1430 tents? (Round the result to 2 decimals).

c) How much profit or loss (before interest and taxes) will the

company make if they sell 1430 tents? (enter result in whole dollars; No decimals; Use the minus sign for losses, e.g. -537; do not use a sign for gains, e.g. 537)

d) Assume that the earnings before interest and taxes is $40,000. If the company has annual interest payments of $8,773, what is the degree of financial leverage (DFL)? (Round the result to 2 decimals)

e) Interpret the DOL (result b, Blank #2) briefly, in 1-2 sentences. What does the number tell you?

Reference no: EM133113895

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