Suppose that Company B’s fixed operating expenses were $3,030,000 for the year. Otherwise, other profit factors are the same as in table. Using the sources of capital and interest expense presented, calculate Company B’s financial leverage gain (or loss) for the year.
|
Company B |
Company C |
|||
|
Totals |
Per Unit |
Totals |
Per Unit |
|
|
Sales volume, in units |
50,000 |
1,500,000 |
||
|
Sales revenue |
$15,000,000 |
$300.00 |
$36,000,000 |
$24.00 |
|
Cost of goods sold expense |
$7,500,000 |
$150.00 |
$27,000,000 |
$18.00 |
|
Gross margin |
$7,500,000 |
$150.00 |
$9,000,000 |
$6.00 |
|
Variable operating expenses |
$3,750,000 |
$75.00 |
$4,200,000 |
$2.80 |
|
Contribution margin |
$3,750,000 |
$75.00 |
$4,800,000 |
$3.20 |
|
Fixed operating expenses |
$1,950,000 |
$39.00 |
$3,000,000 |
$2.00 |
|
Operating profit |
$1,800,000 |
$36.00 |
$1,800,000 |
$1.20 |