Question

At an output level of 6,000 units, you have calculated that the degree of operating leverage is 2.3. The operating cash flow is $12,000 in this case. a. Ignoring the effect of taxes, what are fixed costs

Answer 1

Answer: $15,600

Explanation:

The following information can be gotten from the question:

Output level = 6,000 units

Degree of operating leverage = 2.3

Operating cash flow = $12,000

Contribution margin = Degree of operating leverage × Operating cash flow

= 2.3 × $12,000

= $27,600

Fixed cost = contribution margin - Operating cash flow

= $27,600 - $12,000

= $15,600