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Haunted Forest, Inc.is selling fog machines. Use the following information about Haunted Forest, Inc. to answer...

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Finance

Haunted Forest, Inc.is selling fog machines. Use the followinginformation about Haunted Forest, Inc. to answer the followingquestions. Average selling price per unit $344. Variable cost perunit $191 Units sold 349 Fixed costs $17,627 Interest expense$4,831 Based on the data above, what is the degree of total(combined) leverage of Haunted Forest, Inc.?

Round the answer to two decimals

Answer & Explanation Solved by verified expert
3.9 Ratings (601 Votes)

Degree of combined leverage = Contribution Margin / EBT
= $ 53,397 / $ 30,939
=           1.73
Working:
EBIT means Earning Before Interest and Taxes.
Contribution Format Income Statement:
Per Unit Total
Sales $        344 $       1,20,056
Variable cost $        191 $           66,659
Contribution margin $        153 $           53,397
Fixed Cost $           17,627
EBIT $           35,770
Interest $             4,831
EBT $           30,939

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Transcribed Image Text

Haunted Forest, Inc.is selling fog machines. Use the followinginformation about Haunted Forest, Inc. to answer the followingquestions. Average selling price per unit $344. Variable cost perunit $191 Units sold 349 Fixed costs $17,627 Interest expense$4,831 Based on the data above, what is the degree of total(combined) leverage of Haunted Forest, Inc.?Round the answer to two decimals

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