Corporate Finance Q104
104The following data is available for two companies.
| Siptea | Brewers | |
| Number of units sold | 200,000 | 200,000 |
| Sales price per unit | $150 | $150 |
| Variable cost per unit | $43 | $98 |
| Fixed operating cost | 500,000 | 150,000 |
| Fixed financing cost | 100,000 | 50,000 |
The DOL for Siptea and Brewers are closest to:
- Option : B
- Explanation : DOL for Siptea: [200,000 ($150 – $43)] / [200,000 ($150 – $43) – 500,000] = 1.024. DOL for Brewers: [200,000 ($150 – $98)] / [200,000 ($150 – $98) – 150,000] = 1.015.
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