Assume that Cheryl’s Posters exchanges a portion of its variable operating costs for fixed operating…


Assume that Cheryl’s Posters exchanges a faction of its capricious untrammelled requires for unwandering untrammelled requires by eliminating sales commissions and increasing sales salaries. This exchange results in a contraction in the capricious untrammelled require per item from $5 to $4.50 and an acception in the unwandering untrammelled requires from $2,500 to $3,000. Table 12.5 presents an dissection enjoy that in Table 12.4, but using the new requires. Although the EBIT of $2,500 at the 1,000-item sales roll is the similar as anteriorly the remove in untrammelled require erection, Table 12.5 shows that the established has acceptiond its untrammelled leverage by removeing to main unwandering untrammelled requires. With the superabundance of the divert rates into Equation 12.5, the stage of untrammelled leverage at the 1,000-item mean roll of sales becomes

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Equation 12.5

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Comparing this rate to the DOL of 2.0 anteriorly the remove to past unwandering requires makes it is obvious that the preferable the established’s unwandering untrammelled requires not-absolute to capricious untrammelled requires, the main the stage of untrammelled leverage.