At an output level of 46,000 units, you calculate that the degree of operating leverage is 3.20. suppose fixed costs are $130,000. what is the operating cash flow at 40,000 units? (do not round intermediate calculations and round your final answer to the nearest whole number, e. g., 32.) operating cash flow $

what is the new degree of operating leverage? (do not round intermediate calculations and round your final answer to 3 decimal places, e. g., 32.161.) degree of operating leverage

Operating cash flow for 40,000 units = $34,426.88

New degree of operating leverage =  4.776

Explanation:

Data provided in the question:

Output level = 46,000 units

Degree of operating leverage = 3.20

Fixed costs = $130,000

Now,

Operating leverage = ( Contribution margin ) ÷ ( Operating cash flow )

Also,

Contribution margin = Operating cash flow + Fixed costs

Thus,

3.20 = ( Operating cash flow + Fixed costs ) ÷ ( Operating cash flow )

or

3.20 = 1 + ( Fixed costs ) ÷ ( Operating cash flow )

or

Operating cash flow = $130,000 ÷ 2.20

or

Operating cash flow = $59,090.91

contribution margin for 46,000 units = $59,090.91 + $130,000

= $189,090.91

and,

Contribution margin for 40,000 units= $189,090.91 × [ 40,000 ÷ 46,000 ]

= $164,426.88

Therefore,

Operating cash flow for 40,000 units

= Contribution margin - Fixed costs

= $164,426.88 - $130,000

= $34,426.88

Now,

New degree of operating leverage = Contribution margin ÷ Operating cash flow

= $164,426.88 ÷ $34,426.88

= 4.776

enjoy the dunce cap fool

rational decision making is a multi-step process for making choices between alternatives. the process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight. the word “rational” in this context does not mean sane or clear-headed as it does in the colloquial sense.

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