15-12A.

Return on operating assets

25%
Operating asset turnover
Operating assets
$20 (mil)
Degree of operating leverage
Operating asset turnover = Sales / Operating assets
5 = Sales / 20,000,000
Sales = 100,000,000
Return on operating assets = Net income / Operating assets
25% = Net income / 20,000,000
Net income = 5,000,000
DOL = (Sales - Variable Costs) / (Sales - Variable Costs - Fixed Costs)
4 = (100,000,000 - Variable Costs) / 5,000,000
20,000,000 = 100,000,000 - Variable Costs
Variable Costs = 80,000,000
Fixed Costs = 15,000,000
Sales price per unit = 100,000,000 / 10,000,000 = 10
Breakeven point = 15,000,000 / (10 - 8) = 7.5 million units

5
4