Problem 11-13 Operating Cash Flow and Leverage [LO4] A proposed project has fixe

Question

Problem 11-13 Operating Cash Flow and Leverage [LO4] A proposed project has fixed costs of $98,000 per year. The operating cash flow at 8,400 units is $94,800. Ignoring the effect of taxes, what is the degree of operating leverage? (Do not round intermediate calculations. Round your answer to 4 decimal places, e.g., 32.1616.) Degree of operating leverage 2.0337 If units sold rise from 8,400 to 8,900, what will be the new operating cash flow? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) Operating cash flow What is the new degree of operating leverage? (Do not round intermediate calculations. Round your answer to 4 decimal places, e.g., 32.1616.) New DOL

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up   Statementshowing Computations Paticulars Amount Fixed costs            98,000.00 Operating cash flow            94,800.00 Contribution = 98000 + 94800         192,800.00 DOL = 192800/94800                  2.0338 Contribution at 8900 Units = 192800/8400*8900         204,276.19 Operating Cash flow = 204,276.19 - 98000         106,276.19 New DOL = 204276.19/106276.19                  1.9221

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