The company is considering two different capital structures G and U. The company also has two different production scenarios where

The company is considering two different capital structures G and U. The company also has two different production scenarios where fixed costs differ. In Scenario I fixed costs are £15,000 whereas in Scenario 2 the fixed costs are £20,000.

The following data applies to a manufacturing company: 

Actual production and sales of a company is 3,000 units

Selling price is £30 per unit

Variable cost is £15 per unit          

The company is considering two different capital structures G and U. The company also has two different production scenarios where fixed costs differ. In Scenario I fixed costs are £15,000 whereas in Scenario 2 the fixed costs are £20,000. 

The capital structure is as follows: 

Calculate:

(a) Operating leverage

(b) Financial leverage

Ignore the effect of taxation.