Calculate Degree of Combined Leverage from the following data:- Sales 50,000 units @  4 Per unit Variable Cost per unit 40% from sales priceFixed Costs -  100,000Interest charges - 3668*2 points7.3561.225.22SubmitClear form

The Degree of Combined Leverage (DCL) can be calculated using the formula:

DCL = Degree of Operating Leverage (DOL) * Degree of Financial Leverage (DFL)

First, we need to calculate DOL and DFL.

1. Calculate the Degree of Operating Leverage (DOL):

DOL = Contribution Margin / Operating Profit

Where:

• Contribution Margin = Sales - Variable Costs
• Operating Profit = Contribution Margin - Fixed Costs

Given:

• Sales = 50,000 units * $4/unit =$200,000
• Variable Costs = 40% of Sales = 0.40 * $200,000 =$80,000
• Fixed Costs = $100,000

So:

• Contribution Margin = $200,000 -$80,000 = $120,000
• Operating Profit = $120,000 -$100,000 = $20,000

Therefore: DOL = $120,000 /$20,000 = 6

2. Calculate the Degree of Financial Leverage (DFL):

DFL = EBIT / (EBIT - Interest)

Where:

• EBIT (Earnings Before Interest and Taxes) = Operating Profit = $20,000
• Interest = 3668*2 = $7336

Therefore: DFL = $20,000 / ($20,000 - $7336) = 1.57

3. Finally, calculate the Degree of Combined Leverage (DCL):

DCL = DOL * DFL = 6 * 1.57 = 9.42

So, the Degree of Combined Leverage is 9.42.