View PoliciesCurrent Attempt in ProgressDorothy Thomas sells gourmet chocolate chip cookies. The results of her last month of operations are asfollows:Sales revenue$48,000Cost of goods sold (all variable)20,000Gross margin28,0008,000Selling expenses (70% variable)12,000Administrative expenses (20% variable)$8,000Operating income(a)What is Dorothy's degree of operating leverage? (Round answer to 2 decimal places, e.g. 52.75.)HideSton sharing (a)What is Dorothy's degree of operating leverage? (Round answer to 2 decimal places, e.g. 52.75.)Operating leverageeTextbook and MediaSave for LaterAttempts: 0 of 2 usedSubmit Answer(b)The parts of this question must be completed in order. This part will be available when you complete thepart above.Oten charingHide!!

Answered: (a) What is Dorothy's degree of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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View Policies
Current Attempt in Progress
Dorothy Thomas sells gourmet chocolate chip cookies. The results of her last month of operations are as
follows:
Sales revenue
$48,000
Cost of goods sold (all variable)
20,000
Gross margin
28,000
8,000
Selling expenses (70% variable)
12,000
Administrative expenses (20% variable)
$8,000
Operating income
(a)
What is Dorothy's degree of operating leverage? (Round answer to 2 decimal places, e.g. 52.75.)
Hide
Ston sharing

(a)
What is Dorothy's degree of operating leverage? (Round answer to 2 decimal places, e.g. 52.75.)
Operating leverage
eTextbook and Media
Save for Later
Attempts: 0 of 2 used
Submit Answer
(b)
The parts of this question must be completed in order. This part will be available when you complete the
part above.
Oten charing
Hide
!!

Expert Solution

Step 1 Introduction

Operating leverage: This leverage helps to identify the position of fixed and variable costs. It measures the relationship between the sales and revenue of the company during the particular period. This leverage indicates that if any change in the sales, it will lead to corresponding changes in profit.

$O p e r a t i n g l e v e r a g e = C o n t r i b u t i o n \div O p e r a t i n g I n c o m e$

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