OceanGate sells external hard drives for $200 each. Its total fixed costs are $30 million, and its variable costs per unit are $140.

OceanGate sells external hard drives for $200 each. Its total fixed costs are $30 million, and its variable costs per unit are $140. The corporate tax rate is 30%. If the economy is strong, the firm will sell 2 million drives, but if there is a recession, it will sell only half as many. a. What will be the percentage decline in sales if the economy enters a recession? b. What will be the percentage decline in profits if the economy enters a recession? c. Comparing your answers to (a) and (b), What is the firm’s degree of operating leverage?

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jeff jeffy answered 1 year ago

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