Answer:
Will increase up to $67,332.5
Explanation:
As per the information we have,
output level = 15,200units
operating leverage = 2.60
operating cash flow = $57,500
First we will calculate the fixed cost:
we can calculate fixed cost with the help of degree of operating leverage formula:
degree of operating leverage = 1 + fixed cost / operating cash flow
2.60 = 1 + fixed cost / 57,500
57,500 + fixed cost = 2.60 * 57,500
fixed cost = 149,500 - 57,500 = $92,000 is the fixed cost.
Now, let us calculate the operating cash flow if output rises to 16,200units:
Percentage Change in Quantity Sold = (16,200 – 15,200) / 15,200 = 0.0658 or 6.58% Percentage Change in OFC = DOL × Percentage Change in Quantity Sold
= 2.6 × 0.0658 = 0.171
New OCF = 57,500 * ( 1 + 0.171)
= 57,500 × 1.171 = $67,332.5
