Question

OceanGate sells external hard drives for $200 each. Its total fixed costs are $30 million, and...

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?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
OceanGate sells external hard drives for $200 each. Its total fixed costs are $30 million, and...
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...
OceanGate sells external hard drives for $200 each. Its total fixed costs are $30 million, and...
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...
OceanGate sells external hard drives for $300 each. Its total fixed costs are $30 million, and...
OceanGate sells external hard drives for $300 each. Its total fixed costs are $30 million, and its variable costs per unit are $240. The corporate tax rate is 30%. If the economy is strong, the firm will sell 6 million drives, but if there is a recession, it will sell only half as many. a. What is the firm's degree of operating leverage (defined as the ratio of the percent change in EBIT to the percent change in sales) in...
OceanGate sells external hard drives for $350 each. Its total fixed costs are $30 million, and...
OceanGate sells external hard drives for $350 each. Its total fixed costs are $30 million, and its variable costs per unit are $290. The corporate tax rate is 30%. If the economy is strong, the firm will sell 4 million drives, but if there is a recession, it will sell only half as many. a. What is the firm's degree of operating leverage (defined as the ratio of the percent change in EBIT to the percent change in sales) in...
OceanGate sells external hard drives for $129 each. Its total fixed costs are $31 million, and...
OceanGate sells external hard drives for $129 each. Its total fixed costs are $31 million, and its variable costs per unit are $77. The corporate tax rate is 37%. If the economy is strong, the firm will sell 4 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? (Negative value should be indicated by a minus sign. Round your...
OceanGate sells external hard drives for $104 each. Its total fixed costs are $35 million, and...
OceanGate sells external hard drives for $104 each. Its total fixed costs are $35 million, and its variable costs per unit are $68. The corporate tax rate is 31%. If the economy is strong, the firm will sell 4 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? (Negative value should be indicated by a minus sign. Round your...
OceanGate sells external hard drives for $228 each. Its total fixed costs are $20 million, and...
OceanGate sells external hard drives for $228 each. Its total fixed costs are $20 million, and its variable costs per unit are $148. The corporate tax rate is 38%. 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? (Negative value should be indicated by a minus sign. Round your...
Two firms, A and B, both produce brushes. The price of brushes is $1.30 each. Firm...
Two firms, A and B, both produce brushes. The price of brushes is $1.30 each. Firm A has total fixed costs of $450,200 and variable costs of 50 cents per brush. Firm B has total fixed costs of $260,000 and variable costs of 72 cents per brush. The corporate tax rate is 30%. If the economy is strong each firm will sell 1,502,000 brushes. If the economy enters a recession, each firm will sell 979,000 brushes. Calculate Firm A's degree...
Cantor Products sells a product for $85. Variable costs per unit are $35, and monthly fixed...
Cantor Products sells a product for $85. Variable costs per unit are $35, and monthly fixed costs are $235,000. a. What is the break-even point in units? b. What unit sales would be required to earn a target profit of $330,000? c. Assume they achieve the level of sales required in part b, what is the degree of operating leverage? (Round your answer to 3 decimal places.)    d. If sales decrease by 30% from that level, by what percentage...
Cantor Products sells a product for $90. Variable costs per unit are $33, and monthly fixed...
Cantor Products sells a product for $90. Variable costs per unit are $33, and monthly fixed costs are $210,900. a. What is the break-even point in units? b. What unit sales would be required to earn a target profit of $513,000? c. Assume they achieve the level of sales required in part b, what is the degree of operating leverage? (Round your answer to 3 decimal places.)    d. If sales decrease by 30% from that level, by what percentage...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT