Posted by marie on Friday, April 2, 2010 at 6:08pm.
Profit=costs
10/50 * n=80000+.1n where n is number of pounds. n will have to be a multiple of 50 the way the bags are made.
.2n-.1n=80000
n= 800,000 lbs.
16,000 bags
what is the degree of operating leaverage at 20,000 bags and at 25,000 bags
The degree of operating leverage at 20,000 bags and at 25,000 bags
DOL = (Quantity x (Selling Price - Variable Cost))/((Quantity x (Selling Price - Variable Cost))- Fixed Cost)
DOL (20,000) = (20,000*(10-5))/(((20,000*(10-5))-80,000) = 5 times
DOL (25,000) = (25,000*(10-5))/(((25,000*(10-5))-80,000) = 2.78 times
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