Reference no: EM131012410
Rocking Motors Inc manufactures motorized wheel chairs. The average selling price for the various units is $500. The associated costs is $300 per unit. Fixed costs for the firm average $180,000 annually. Company has $1,000,000 debt paying 12% interest.
a) How many stoves should the firm produce and sell in order to break-even? Show your answer graphically too
b) What is the dollar sales volume the firm must achieve to reach the breakeven point?
c) Define the degree of operating several (DOL), calculate it, and interpret it for this firm if the firm is planning to produce and sell 2,000 units of these stoves? What does DOL reflect?
d) What will be the projected effect upon EBIT if the firm’s sales level should increase by 20% from the volume noted in part c?
e) Define the degree of financial leverage (DFL), calculate it, and interpret it if the firm sells 2000 units
f) Define and, given the above information calculate the firm’s degree of total leverage
g) How can the firm decrease various risks it faces?
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