Exam : leverage

1. What is leverage? Write difference between operating and financial leverage?

2. Bd food ltd. sells food to university cafeterias’ for tk 25 a box. The fixed costs of this operating are tk 100 000. While the variable cost per box is tk 20.
(a) What is the break even point in boxes?
(b) Show BEP chart
(c) Calculate the profit or loss on 200 000 boxes and on 40000 boxes.
(d) What is the degree of operating leverage at 30000 boxes and 40000 boxes? Why the degree of operating leverage change as the quantity sold increases?
(e) If the firm has an annual interest expenses of tk 15000. Calculate the degree of financial leverage at both 30000 and 40000 boxes.
(f) What is the degree of combined leverage at both sales levels?