You are a hard working analyst in the office of financial operations for a manufacturing firm that produces a single product. You have developed the following cost structure information for this company. All of it pertains to an output level of 10 million units.
Using this information, find the break even point in units of out put for the firm.
Return on operating assets = 25%
Operating asset turnover = 5 times
Operating assets = 20 million
Degree of operating leverage = 4 times
Using this information, find the break even point in units of out put for the firm.
Return on operating assets = 25%
Operating asset turnover = 5 times
Operating assets = 20 million
Degree of operating leverage = 4 times
SOLUTION PREVIEW
Return
on operating assets = Net operating income/ Operating assets
25%
= Net operating income / 20,000,000
Net
operating income = 20,000,000 x 25%
= $5,000,000
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