. If Healthy Foods has an annual interest expense of $10,000, calculate the
degree of financial leverage at both 20,000 and 25,000 bags.
20,000 bags x $10 = 200,000 - $10,000 = 190,000 – 80,000 = 110,000
25,000 bags x $10 = 250,000 - $10,000 = 240,000 – 80,000 = 160,000
e. What is the degree of combined leverage at both sales levels?
How is 80,000÷2,000 diffferent from the quotient 80,000÷200or80,000÷20
To calculate the degree of financial leverage, you need to know the profit before interest and taxes (PBIT) at each sales level. However, the given information does not provide the PBIT. Without the PBIT, it is not possible to calculate the degree of financial leverage or the degree of combined leverage.
The degree of combined leverage is calculated by multiplying the degree of operating leverage (DOL) with the degree of financial leverage (DFL). However, without the DOL and DFL values, it is not possible to calculate the degree of combined leverage.