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Beano Ltd manufactures beanbags. The company’s variable costs are $15 per unit and fixed operating costs...

Beano Ltd manufactures beanbags. The company’s variable costs are $15 per unit and fixed operating costs are $2.1 million annually. The beanbags are sold for $45 each.

Required

a      What is Beano Ltd’s break-even point in units?

  1. What is Beano Ltd’s break-even point in sales dollars? Confirm your answer using an alternative method.
  1. What is Beano Ltd’s degree of operating leverage (DOL) if sales are 85,000 units for the year?
  2. What is Beano Ltd’s EBIT if sales are 62,500 units for the year.
  1. What would be the financial implications of a plant modernisation program to increase operating leverage in order to reduce its per-unit variable costs?

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Expert Solution

jeff jeffy answered 1 year ago
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