At a production level of 5000 units, the CLE is evaluated at 1.40. If production increases...

At a production level of 5000 units, the CLE is evaluated at 1.40. If production increases to 6,000 units, what will be the percentage change in cash flow from operations?

Expert Solution

Sol;

Production = 5,000 units

CLE level = 1.40

Production increase = 6,000 units

To compute percentage change in cash flow from operations (OCF):

Sales percentage change = (Production increase - Production) / Production

Sales percentage change = (6,000 - 5,000) / 5,000 = 0.20 or 20%

CLE level = Percentage change in OCF / Sales percentage change

1.40 = Percentage change in OCF / 20%

Percentage change in OCF = 1.4 * 20% = 0.28%

Therefore percentage change in cash flow from operations will be 28%.

jeff jeffy answered 2 years ago

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