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Haunted Forest, Inc.is selling fog machines. Use the following information about Haunted Forest, Inc. to answer...

Haunted Forest, Inc.is selling fog machines. Use the following information about Haunted Forest, Inc. to answer the following questions. Average selling price per unit $344. Variable cost per unit $191 Units sold 349 Fixed costs $17,627 Interest expense $4,831 Based on the data above, what is the degree of total (combined) leverage of Haunted Forest, Inc.?

Round the answer to two decimals

Solutions

Expert Solution

Degree of combined leverage = Contribution Margin / EBT
= $ 53,397 / $ 30,939
=           1.73
Working:
EBIT means Earning Before Interest and Taxes.
Contribution Format Income Statement:
Per Unit Total
Sales $        344 $       1,20,056
Variable cost $        191 $           66,659
Contribution margin $        153 $           53,397
Fixed Cost $           17,627
EBIT $           35,770
Interest $             4,831
EBT $           30,939

jeff jeffy answered 1 year ago
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