Problem:
A proposed project has fixed costs of $90,000 per year. The operating cash flow at 4,700 units is $96,000. Ignoring the effect of taxes,
Required:
Question 1: What is the degree of operating leverage?
Question 2: If units sold rise from 4,700 to 5,200, what will be the new operating cash flow?
Question 3: What is the new degree of operating leverage?
Note: Explain all steps comprehensively.