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Your clothing business, FashionV Co has fixed costs of $1,000 per year, depreciation charges of $500 a year, annual reve
Posted: Sun Jul 03, 2022 6:43 am
by answerhappygod
- Your Clothing Business Fashionv Co Has Fixed Costs Of 1 000 Per Year Depreciation Charges Of 500 A Year Annual Reve 1 (77.65 KiB) Viewed 12 times
- Your Clothing Business Fashionv Co Has Fixed Costs Of 1 000 Per Year Depreciation Charges Of 500 A Year Annual Reve 2 (77.65 KiB) Viewed 12 times
Your clothing business, FashionV Co has fixed costs of $1,000 per year, depreciation charges of $500 a year, annual revenue of $6,000, and variable costs equal to two-thirds of revenues. A) What is the degree of operating leverage (DOL)? (2 Marks) B) Due to the pandemic Covid-19, you decided to close your clothing business shop and moved to an online business resulting in a reduction in fixed costs of $500 per year and the rest of the variables remain unchanged. What is the new degree of operating leverage (DOL)? (2 Marks) C) Risk is reduced when a high proportion of costs are fixed. Based on your observation in answers A and B, do you agree with the
statement? Which business is riskier, a physical clothing shop with high DOL or an online clothing shop with lower DOL? Explain. (6 Marks)