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(Operating leverage) Rocky Mount Metals Company manufactures an assortment
of wood burning stoves. The average selling price for the various units is $550. The associated
variable costs is $350 per unit. Fixed costs for the firm average $118,000 annually.
a. What is the break-even point in units for the company?
b. What is the dollar sales volume the firm must achieve to reach the break-even point?
c. What is the degree of operating leverage for a production and sales level of 5,000 units
for the firm? Calculate to three decimal places
d. What will be the projected effect on earnings before interest and taxes if the firms sales
level should increase by 40 percent from the volume noted in part ©?
