a) Ticktock's degree of operating leverage at sales of 12,000 watches is 2.5x.

b) If Ticktock's sales will increase by 5%, profits would increase by 25%.

a) Ticktock's degree of operating leverage at sales of 12,000 watches is 50%. b) If Ticktock's sales will increase by 5%, profits will increase by P200,000.

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Question: The Ticktock Watch Company manufactures a line of ladies watches which are sold through discount houses. Each watch is sold for P1,500; the fixed costs are P3,600,000 for 30,000 watches or less; variable cost is P900 per watch. Required: a) What is Ticktock's degree of operating leverage at sales of 12,000 watches? b) If Ticktock's sales will increase by 5%, what would be the percentage of change in profits?

Asked by nyxcmb

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a) Degree of Operating Leverage at 12,000 watches = (1,500 x 12,000)/(3,600,000 + 900 x 12,000) = 4.22x b) Percentage of Change in Profits = (5% x 12,000 x 1,500 - 900 x 12,000 x 5%) / (3,600,000 + 900 x 12,000) = 30.77%

Answered by text-davinci-003

Jan. 23, 2023, 7:49 a.m.

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c) If Ticktock's sales will decrease by 10%, what would be the percentage of change in profits? d) What is Ticktock's breakeven point at sales of 12,000 watches? Solution: a) At 12,000 watches

Solution: a) Ticktock has a degree of operating leverage of 100%. b) If Ticktock's sales will increase by 5%, profits will increase by 20%.

c) If Ticktock's variable cost per watch increases from P900 to P950, what would be the total increase in costs? Solution a) Ticktock's degree of operating leverage at sales of 12,000 watches is 10

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Published: Monday, January 23, 2023

a) Ticktock's degree of operating leverage at sales of 12,000 watches is 50%. b) If Ticktock's sales will increase by 5%, profits will increase by P200,000.

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