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What is the operating break-even point

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What is operating leverage, and how does it affect a firm's business risk? 

a. What is the operating break-even point if a company has fixed costs of $22,000, a sales price of $36, and variables costs of $14.

b. What is the break-even quantity if the price is decreased to $30?

c. What is the break-even point if the price is decreased to $30 and costs increase to $19?

d.Now, to develop an example which can be presented to Bernie's management to illustrate the effects of financial leverage, consider two hypothetical firms: Firm U, which uses no debt financing, and Firm L, which uses $75,000 of 5 percent debt. Both firms have $250,000 in assets, a 25 percent tax rate, and an expected EBIT of $60,000.

Reference no: EM132408199

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