OceanGate sells external hard drives for $260 each. Its total fixed costs are $30 million, and its variable costs per unit are $210. The corporate tax rate is 30%. If the economy is strong, the firm will sell 2 million drives, but if there is a recession, it will sell only half as many. a.
What is the firms' degree of operating leverage (defined as the ratio of the percent change in EBIT to the percent change in sales)?

Degree of operating leverage

b.
If the economy enters a recession, what will be the firm’s after-tax profit? (Enter your answer in millions.)

After-tax profit $ million

a. in order to calculate this we must assume that the economy entered a recession:

degree of operating leverage = [($20 - $70)/$70] / [($260 - $520)/$520] = -0.7143 / -0.5 = 1.43

b. $14 million

Explanation:

strong economy:

total sales $520 million

variable costs $420 million

gross profit $100 million

fixed costs $30 million

EBIT $70 million

income taxes $21 million

net income $49 million

weak economy:

total sales $260 million

variable costs $210 million

gross profit $50 million

fixed costs $30 million

EBIT $20 million

income taxes $6 million

net income $14 million

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

your welcome leave a rate and a < 3