China America Manufacturing is evaluating two different operating structures which are described below. The firm has annual interest expense of $250, common shares outstanding of 1,000, and a tax rate of 40 percent. 
(a) For each operating structure, calculate
(a1) EBIT and EPS at 10,000, 20,000, and 30,000 units.
(a2) the degree of operating leverage (DOL) and degree of total leverage (DTL) using 20,000 units as a base sales level.
(a3) the operating breakeven point in units.
(b) Which operating structure has greater operating leverage and business risk?
(c) If China America projects sales of 20,000 units, which operating structure is recommended?
Definitions:
Actualization
The process of realizing or achieving one's full potential or self-fulfillment, often associated with Maslow's hierarchy of needs.
Unconscious
The segment of the psyche which remains beyond the reach of conscious awareness, yet influences actions and feelings.
Conditional Positive Regard
A concept suggesting that acceptance and love from others are contingent upon one's behavior meeting certain conditions or standards.
Self-Actualization
The realization or fulfillment of one's talents and potentialities, considered a drive or need present in everyone.
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